STOCK PURCHASE AGREEMENT
BY AND AMONG
ITERA HOLDINGS BV
AND
DUNE ENERGY, INC.
AND
VAQUERO PARTNERS, LLC
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of May
10, 2004 (the "Effective Date"), is made by and among ITERA HOLDINGS BV, a
Netherlands company ("Buyer") and DUNE ENERGY, INC., a Delaware corporation (the
"Company"). Vaquero Partners, LLC, a Texas limited liability company (the "LLC")
joins this Agreement only as to Sections 4.4 and 4.14 and Articles III, VII and
IX solely with respect to references to the LLC. Capitalized terms used herein
and not otherwise defined have the meanings given them in Article VIII.
RECITALS:
A. The Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded by Sections 4(1) and 4(2) of the Securities Act of 1933,
as amended (the "Securities Act"), and Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act.
B. The Buyer desires, upon the terms and conditions stated in this
Agreement, to purchase from the Company that number of shares of the Company's
common stock, par value $.001 per share (the "Common Stock"), that comprises 78%
of the issued and outstanding shares of the Company's Common Stock immediately
after such purchase by Buyer (the "Shares"), calculated on an as-converted,
fully-diluted basis (assuming full conversion and exercise of all of the
Company's outstanding convertible or exercisable securities and taking into
effect the shares to be issued to The Altitude Group, LLC and Vaquero Oil & Gas,
Inc., a Texas corporation ("VOG") as described in Sections 4.13 and 7.12 hereof
and to Buyer pursuant to the Closing), for an aggregate purchase price of
$12,000,000. The parties agree that the Shares are equal to 70,016,725 shares of
the Company's Common Stock based on the information provided by Company to
Buyer, but Buyer shall have the right to redetermine the Shares if it becomes
aware of new information regarding the Company's capitalization that is not
consistent with the representations and disclosures herein..
AGREEMENT:
In consideration of the premises and the mutual representations,
warranties and covenants contained herein, the Company and the Buyer hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1. Purchase and Sale of Shares. At the Closing, subject to the
terms of this Agreement and the satisfaction or waiver of the conditions set
forth in Articles VI and VII hereof, the Company shall sell to the Buyer, and
Buyer shall purchase from the Company, the Shares, and the Company shall cause
its transfer agent to issue to Buyer a stock certificate evidencing ownership of
such number of Shares.
1.2. Payment at Closing. On the Closing Date, Buyer shall pay
$11,000,000 for the Shares (which constitutes the balance of the purchase price
owed to the Company after deduction of the Commitment Funds (as defined in
Section 1.4 hereof), by wire transfer to the Company of immediately available
funds in accordance with the written wire instructions furnished to the Buyer by
the Company upon the execution hereof.
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1.3. Closing Date. Subject to the satisfaction or waiver of the
conditions set forth in Articles VI and VII hereof, the Closing for the purchase
of the Shares shall take place at 10:00 a.m. Eastern Time on May 12, 2004 or
such other date or time agreed upon by each of the parties to this Agreement
(the "Closing Date"). The Closing shall be held at the offices of Xxxxx &
Xxxxxxx LLP, 000 X. Xxxxx Xxxxxx, Xxxxx 0000, Xxxxx, Xxxxxxx 00000, or at such
other place as the parties agree.
1.4. Commitment Funds. The parties acknowledge that Buyer has (i)
already paid to Company the sum of $730,000 and (ii) agreed to pay the Company
an additional $270,000 (collectively, the "Commitment Funds") pursuant to a
Participation Letter Agreement executed as of April 7, 2004, and that pursuant
to such agreement the Commitment Funds shall be applied as a credit against the
purchase price of the Shares at the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Buyer hereby represents and warrants to the Company the following:
2.1. Organization and Qualification. Buyer is a company duly
incorporated, validly existing and in good standing under the laws of the
Netherlands.
2.2. Authority Relative to this Agreement. Buyer has full corporate
power and authority to execute and deliver this Agreement and the agreements
ancillary thereto (the "Ancillary Agreements") to which it is a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
Buyer of this Agreement and the Ancillary Agreements to which it is a party and
the consummation by Buyer of the transactions contemplated hereby and thereby
have been duly and authorized by all necessary action by the Board of Directors
of Buyer, and no other action on the part of the Board of Directors of Buyer is
required to authorize the execution, delivery and performance of this Agreement
and the Ancillary Agreements to which it is a party and the consummation by
Buyer of the transactions contemplated hereby and thereby. This Agreement and
the Ancillary Agreements to which Buyer is a party have been or will be, as
applicable, duly and validly executed and delivered by Buyer and, assuming the
due authorization, execution and delivery hereof by the Company, constitutes or
will constitute, as applicable, a legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar Laws relating to the
enforcement of creditors' rights generally and by general principles of equity.
2.3. No Conflicts. The execution and delivery by Buyer of this
Agreement and the Ancillary Agreements to which it is a party does not, and the
performance by Buyer of its obligations under this Agreement and the Ancillary
Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby do not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the articles of association or
by-laws of Buyer;
(b) conflict with or result in a violation or breach of any
Law or Order applicable to Buyer or its assets or properties; or
(c) (i) conflict with or result in a violation or breach of,
(ii) constitute a default (or an event that, with or without notice or
lapse of time or both, would constitute a default) under, (iii) require
Buyer to obtain any consent, approval or action of, make any filing with
or give any notice to any Person as a result of the terms of (except for
(A) such consents approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state or
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federal securities laws; and (B) such filings as may be required under the
HSR Act), or (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect
to.
2.4. Investment Advisors. No broker, investment banker, financial
advisor or other Person is entitled to any broker's, finder's, financial
advisor's or similar fee or commission from Buyer in connection with this
Agreement and the transactions contemplated hereby.
2.5. Buyer Financing. Buyer has sufficient funds to enable it to pay
the Purchase Price and to perform its obligations under this Agreement and the
Ancillary Documents to which it is a party.
2.6. Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in any schedule to this Agreement
furnished by Buyer pursuant to any provision of this Agreement or in any of the
closing documents delivered pursuant to this Agreement or the Ancillary
Agreements contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein, in
the light of the circumstances under which they were made, not misleading.
2.7. Reliance on Exemptions. Buyer understands that the Shares are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of the United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Buyer set forth herein to determine the availability of
such exemptions and the eligibility of Buyer to acquire the Shares.
2.8. Experience; Acquisition of Shares for Investment. Buyer is
experienced in evaluating companies such as the Company, and has such knowledge
and experience in financial and business matters to enable Buyer to evaluate the
merits and risks of Buyer's prospective investment in the Company, and has the
ability to bear the economic risks of the investment in the Shares. Buyer is an
"accredited investor" within the meaning of Regulation D promulgated under the
Securities Act and has been afforded the opportunity to ask questions and
receive answers regarding the Company and has reviewed the data and information
it requested from Company in connection with this Agreement. Buyer is acquiring
the Shares for investment and not with a view toward, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the Shares. Buyer agrees that the Shares may not be sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of
(i) without registration under the Securities Act except pursuant to an
exemption from such registration available under the Securities Act and (ii)
except in accordance with any applicable provisions of state securities laws.
2.9. No Public Offering. Buyer has not received any information
relating to the Shares or the Company, and is not purchasing the Shares as a
result of, any form of general solicitation or general advertising, including,
but not limited to, any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or pursuant to any seminar or meeting whose attendees were
invited by any general solicitation or general advertising.
2.10. Certain Payments. Buyer has not directly or indirectly, in
violation of applicable Law, made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (a) to obtain
favorable treatment in securing business; (b) to pay for favorable treatment for
business secured; or (c) to obtain special concessions or for special
concessions already obtained, for or in respect of Buyer.
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2.11. Absence of Litigation. There is no Action or Proceeding before
or by any court, public board, government agency, self-regulatory organization
or body pending or, to the Buyer's knowledge, threatened against or affecting
the Buyer, any of its officers or directors acting as such, that could,
individually or in the aggregate, have a material adverse effect on the assets,
liabilities, financial condition or results of operation of the Buyer, taken as
a whole, or any effect on the ability of the Buyer to perform its obligations
pursuant to the transactions contemplated by this Agreement or under the
agreements or instruments to be entered into or filed in connection herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND CERTAIN OTHER PERSONS
Subject to such matters as are disclosed in the Company's SEC
Documents, the Company and the LLC (with respect to matters relating to the LLC
only) represent and warrant to the Buyer that:
3.1. Organization and Qualification. The Company is duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with full corporate power and authority to own, lease, use and
operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted. The Company and its sole subsidiary, the
LLC, are duly qualified to do business and are in good standing in every
jurisdiction in which the nature of the business conducted by them makes such
qualification necessary, except where the failure to be so qualified or in good
standing in each such jurisdiction would not have a Material Adverse Effect. The
LLC is duly organized, validly existing and in good standing under the laws of
the State of Texas, with full corporate power and authority to own, lease, use
and operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted.
3.2. Authorization; Enforcement. (a) (i) The Company has all
requisite corporate power and authority to enter into and to perform its
obligations under this Agreement and the Ancillary Agreements, to consummate the
transactions contemplated hereby and thereby and to deliver the Shares in
accordance with the terms hereof; (ii) the execution, delivery and performance
of each of this Agreement and the Ancillary Agreements by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including without limitation the issuance and sale of the Company Shares, have
been duly authorized by the Company's Board of Directors and no further consent
or authorization of the Company, its Board or Directors or its shareholders is
required; (iii) each of this Agreement and the Ancillary Agreements have been or
will be duly executed by the Company; and (iv) each of this Agreement and the
Ancillary Agreements constitutes or will upon execution constitute a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, or moratorium or similar laws affecting the rights
of creditors generally and the application of general principles of equity. (b)
(i) The LLC has all requisite corporate power and authority to enter into and to
perform its obligations under this Agreement and the Ancillary Agreements; (ii)
the execution, delivery and performance of each of this Agreement and the
Ancillary Agreements by the LLC have been duly authorized by the Company's
Manager and no further consent or authorization of the LLC, its Manager or its
members is required; (iii) each of this Agreement and the Ancillary Agreements
have been or will be duly executed by the LLC; and (iv) each of this Agreement
and the Ancillary Agreements constitutes or will upon execution constitute a
legal, valid and binding obligation of the LLC enforceable against the LLC in
accordance with its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, or moratorium or similar laws affecting the rights
of creditors generally and the application of general principles of equity.
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3.3. Capitalization. The authorized capital stock of the Company
consists of (i) 100,000,000 shares of the Common Stock, of which 15,100,757
shares are issued and outstanding; and (ii) 1,000,000 shares of preferred stock,
par value $.001 per share, 650,000 of which have been designated as Series A
Convertible Preferred Stock, of which 222,222 shares are issued and outstanding
(convertible into 444,444 shares of Common Stock). Except as set forth on
Schedule 3.3, the Company has not issued any capital stock since May 5, 2004.
All of such outstanding shares of Common Stock are duly authorized, validly
issued, fully paid and nonassessable. The Company Shares have been duly
authorized, and when delivered and paid for in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable, free from all
taxes, liens, claims, encumbrances and charges with respect to the delivery
thereof (other than those imposed through acts or omissions of Buyer). No shares
of capital stock of the Company, including the Shares, are subject to preemptive
rights or any other similar rights of the shareholders of the Company or any
liens or encumbrances imposed through the actions or failure to act of the
Company. Other than pursuant to this Agreement and as described on Schedule 3.3
hereto, there are no outstanding options, warrants, scrip, rights to subscribe
for, puts, calls, rights of first refusal, agreements, understandings, claims,
antidilution protection or other commitments or rights of any character
whatsoever that could require the Company to issue additional shares of capital
stock of the Company or adjust the purchase or exercise price of any such
instrument. Except as set forth on Schedule 3.3, there are no agreements or
arrangements, including any set forth in the SEC Documents, under which the
Company is obligated to register the sale of any of its Shares under the
Securities Act. Assuming the accuracy of each of the representations and
warranties of the Buyer contained in Section 2, the issuance by the Company of
the Company Shares is exempt from registration under the Securities Act. A true,
complete and correct listing of all of the Company's wholly- or partially-owned
subsidiaries and the Company's ownership interest in each is set forth on
Schedule 3.3 hereto.
3.4. No Conflicts; No Violation.
(a) The execution, delivery and performance of each of this
Agreement and the Ancillary Agreements by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby including,
without limitation, the delivery of the Shares will not (i) conflict with or
result in a violation of any provision of the Articles of Incorporation or
By-laws of the Company or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment (including without limitation, the triggering
of any anti-dilution provision), acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the Company or any of
its subsidiaries, including the LLC, is a party, or (iii) assuming the accuracy
of the representations of the Buyer, result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company, any of subsidiaries including the LLC, or
its securities are subject), applicable to the Company or by which any property
or asset of the Company or any of its subsidiaries, including the LLC, is bound
or affected, except in the case of clauses (ii) and (iii) for such conflicts,
breaches, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The execution, delivery and performance of each of this
Agreement and the Ancillary Agreements by the LLC will not (A) conflict with or
result in a violation of any provision of the Articles of Organization or
Operating Agreement of the LLC or (B) violate or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under, or give to others
any rights of termination, amendment (including without limitation, the
triggering of any anti-dilution provision), acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the LLC is a
party, or (C) assuming the accuracy of the representations of the Buyer, result
in a violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the LLC is subject),
applicable to the LLC or by which any property or asset of the LLC is bound or
affected, except in the case of clauses (B) and (C) for such conflicts,
breaches, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect.
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(b) The Company is not in violation of its Articles of Incorporation
or By-laws. To the knowledge of the Company, the Company is not in violation of
any law, ordinance or regulation of any governmental entity. The Company is not
in default (and no event has occurred which with notice or lapse of time or both
could put the Company in default) under any agreement, indenture or instrument
to which the Company or any of its subsidiaries, including the LLC, is a party
or by which any property or assets of the Company or any of its subsidiaries,
including the LLC, is bound or affected, except for such defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The LLC is not
in violation of its Articles of Organization or Operating Agreement. To the
knowledge of the LLC, the LLC is not in violation of any law, ordinance or
regulation of any governmental entity. The LLC is not in default (and no event
has occurred which with notice or lapse of time or both could put the LLC in
default) under any agreement, indenture or instrument to which the LLC is a
party or by which any property or assets of the LLC is bound or affected, except
for such defaults as would not, individually or in the aggregate, have a
Material Adverse Effect.
3.5. Approvals. Assuming the accuracy of the representations of the
Buyer, except for the filing of a Form D and as may be required under the
Securities Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or self
regulatory agency for it to execute, deliver or perform any of its obligations
under this Agreement, in accordance with the terms hereof, or sell the Shares in
accordance with the terms hereof. All consents, authorizations, orders, filings
and registrations that the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the Closing
Date.
3.6. SEC Documents; Financial Statements. Since January 1, 2002, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Exchange Act (the Company's 10-QSB for the quarter ended September 30,
2003 and its 10-KSB for the year ended December 31, 2003, together with all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein are referred to herein as the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except to the extent that information contained in any SEC Filings
has been revised or superseded by a later-filed SEC Document filed and publicly
available prior to the date hereof. The financial statements of the Company
included in the SEC Documents have been prepared in accordance with United
States generally accepted accounting principles ("GAAP"), consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). The financial
statements and notes contained or incorporated by reference in the SEC Documents
fairly present the financial condition and the results of operations, changes in
shareholders' equity and cash flow of the Company as at the respective dates of
any for the periods referred to in such financial statements, all in accordance
with GAAP and Regulation S-X of the SEC, subject, in the case of interim
financial statements, to year-end adjustments and the omission of notes to the
extent permitted by Regulation S-X of the SEC.
3.7. Absence of Certain Changes. Except as disclosed in the SEC
Documents and Schedule 3.7, since December 31, 2003, (i) there has been no
material adverse change in the assets, liabilities, business, properties,
operations, financial condition or results of operations of the Company and its
subsidiaries, including the LLC, taken as a whole; (ii) the Company has not
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taken any steps to seek protection pursuant to any bankruptcy law nor does the
Company have any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact
which would reasonably lead a creditor to do so; and (iii) there has not been:
(a) any declaration, accrual, set aside or payment of any dividend
or any other distribution in respect of any shares of capital stock of the
Company, or any repurchase, redemption or any other acquisition by the Company
of any shares of capital stock or other securities;
(b) any amendment to any governing document of the Company or the
LLC or any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction involving the Company or LLC;
(c) any creation of any subsidiary of the Company or acquisition by
the Company of any equity or other interest in any other Person;
(d) except as contemplated in that certain Participation Letter
Agreement dated as of April 7, 2004, between Buyer and the LLC (the
"Participation Letter Agreement") any capital expenditure by the Company or the
LLC which exceeds $100,000 in the aggregate;
(e) any sale of a LLC Oil and Gas Property;
(f) except in the ordinary course of business, any action by the
Company to (i) enter into, or suffer any of the assets owned or used by it to
become bound by, any Company Material Contract (hereinafter defined), of (ii)
amend or terminate, or waive any material right or remedy under, any Company
Material Contract; or
(g) except as contemplated in the Participation Letter Agreement,
any (i) acquisition, lease or license by the Company of any material right or
other material asset from any Person; (ii) sale or other disposition or lease or
license by the Company of any material right or other material asset to any
Person or (iii) waiver or relinquishment by the Company of any right, except for
rights or other assets acquired, leased, licensed or disposed of in the ordinary
course of business.
The parties acknowledge that the Company has declared a 1 for 2
reverse stock split of its outstanding shares of capital stock effective as of
May 21, 2004.
3.8. No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced or disclosed in an SEC Document.
3.9. Xxxxxxxx-Xxxxx Act. The Company is in compliance with any and
all applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective
as of the date hereof, and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof,
except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.
3.10. Absence of Litigation. Except as disclosed in the SEC
Documents, there is no Action or Proceeding before or by any court, public
board, government agency, self-regulatory organization or body pending or, to
the knowledge of the Company, threatened against or affecting the Company, any
of its officers or directors acting as such, or any of its subsidiaries,
including the LLC, that could, individually or in the aggregate, have a Material
Adverse Effect.
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3.11. Intellectual Property Rights. The Company and its
subsidiaries, including the LLC, own or possess the licenses or rights to use
all patents, patent applications, patent rights, inventions, know-how, trade
secrets, trademarks, trademark applications, service marks, service names, trade
names and copyrights necessary to enable it to conduct its business as now
operated (the "Intellectual Property"), except where the failure to possess such
licenses or rights to use would not have, individually or in the aggregate, a
Material Adverse Effect. None of the Company's or its subsidiaries' Intellectual
Property have expired or terminated, or are expected to expire or terminate,
within three years from the date of this Agreement. The Company does not have
any knowledge of any infringement by the Company or any of its subsidiaries of
Intellectual Property of others. There is no Action or Proceeding being made or
brought, or to the knowledge of the Company, being threatened against the
Company or any of its subsidiaries regarding the Company's or its subsidiaries'
Intellectual Property. The Company is unaware of any facts or circumstances
which might reasonably give rise to any of the foregoing infringements or
Actions or Proceedings. The Company and its subsidiaries, including the LLC,
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of its intellectual properties.
3.12. Tax Status. The Company represents that as of the date hereof
and as of the Closing Date (i) all Tax returns, statements, reports and forms
(including estimated tax or information returns and reports)(collectively, the
"Returns") required to be filed with any Taxing Authority with respect to any
Pre-Closing Tax Period by or on behalf of the Company or any subsidiary,
including the LLC (except for those Returns relating to the Company's taxable
years ended October 31, 2001, 2002 and 2003 (the "Unfiled Returns")), have, to
the extent required to be filed on or before the date hereof, been filed when
due in accordance with all applicable laws; unless and only to the extent that
the Company or a subsidiary, including the LLC, has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes; (ii) as of the time of filing, the Returns correctly reflected the facts
regarding the income, business assets, operations, activities and status of the
Company, its subsidiaries, including the LLC, and any other information required
to be shown therein; (iii) all Taxes shown as due and payable on the Returns
that have been filed have been timely paid, or withheld and remitted to the
appropriate Taxing Authority and no Taxes should have been shown as due and
payable on the Unfiled Returns; (iv) the charges, accruals and reserves for
taxes with respect to the Company and its subsidiaries, including the LLC, for
any Pre-Closing Tax Period (including any Pre-Closing Tax Period for which no
Return has yet been filed) reflected on the books of the Company and its
subsidiaries (excluding any provision for deferred income taxes) are adequate to
cover such Taxes; (v) all Returns filed with respect to Tax years of the Company
and its subsidiaries, including the LLC, through the Tax year ended October 31,
2003, have been examined and closed or are Returns with respect to which the
applicable period for assessment under applicable law, after giving effect to
extensions or waivers, has expired; (vi) neither the Company nor any subsidiary,
including the LLC, is delinquent in the payment of any Tax or has requested any
extension of time within which to file any Return and has not yet filed such
Return; (vii) neither the Company nor any subsidiary, including the LLC, (or any
member of any affiliated, consolidated, combined or unitary group of which the
Company or any subsidiary is or has been a member) has granted any extension or
waiver of the statute of limitations period applicable to any Return, which
period (after giving effect to such extension or waiver) has not yet expired;
(viii) there is no claim, audit, Action or Proceeding now pending or threatened
against or with respect to the Company or any subsidiary, including the LLC, in
respect of any Tax; there are no requests for rulings or determinations in
respect of any Tax pending between the Company or any subsidiary, including the
LLC, and any Taxing Authority; (ix) neither the Company nor any subsidiary,
including the LLC, owns any interest in real property in any jurisdiction in
which a Tax is imposed on the transfer of a controlling interest in an entity
that owns any interest in real property; (x) there are no liens for Taxes upon
the assets of the Company or any subsidiary, including the LLC, except liens for
current Taxes not yet due; (xi) Company is not subject to withholding under
Section 1445 of the Code with respect to any transaction contemplated hereby;
(xii) neither the Company nor any subsidiary, including the LLC, will be
required to include any adjustment in taxable income for any Post-Closing Tax
Period under Section 481(c) of the Code (or any similar provision of the Tax
laws of any jurisdiction) as a result of a change in method of accounting for a
Pre-Closing Tax Period or pursuant to the provisions of any agreement entered
into with any Taxing Authority with regard to the Tax liability of the company
or any subsidiary for any Pre-Closing Tax Period; (xiii) neither the Company nor
9
any subsidiary, including the LLC, has been a member of an affiliated,
consolidated, combined or unitary group other than one of which Company was the
common parent or participated in any other arrangement whereby any income,
revenues, receipts, gain, loss or Tax asset of the Company or any subsidiary,
including the LLC, was determined or taken into account for Tax purposes with
reference to or in conjunction with any income, revenues, receipts, gain, loss,
asset, liability or Tax asset of any other person; (xx) neither the Company nor
any subsidiary, including the LLC, is currently under any contractual obligation
to pay any amounts of the type described in clause (ii) or (iii) of the
definition of "Tax"; and (xxi) Schedule 3.12 contains a list of all
jurisdictions (whether foreign or domestic) to which any Tax is property payable
by the Company or any subsidiary, including the LLC.
3.13. Assets; Contracts and Agreements; Vendors and Customers.
(a) Schedule 3.13(a) sets forth all of the assets of the Company,
other than Company Material Contracts (defined in subsection (b) hereof).
(b) Schedule 3.13(b) sets forth all material contracts, including
oil, gas and mineral leases (the "Leases") and assignments, to which the Company
or the LLC is a party (each, a "Company Material Contract"), including, but not
limited to, contracts (i) relating to indebtedness for borrowed money in an
amount exceeding $1 million, (ii) that is a "material contract" (as such term is
defined in Item 601(b)(10) of Regulation S-K of the SEC), (iii) that obligates
the Company or the LLC to make any payments or issue or pay anything of value to
any director, officer, key employee or consultant, (iv) that limit or purport to
limit the ability of the Company or the LLC to compete in the United States oil
and gas exploration, production and marketing business with any Person in any
geographic area or during any period of time, (v) that includes any material
indemnification, contribution or guarantee obligations, (vi) that relate to
capital expenditures involving total payments of more than $500,000, (vii)
requiring annual or remaining payments in excess of $100,000 after the date
hereof, (viii) that is a seismic license agreement, (ix) that is a fixed price
commodity sales agreement with a remaining term of more than 60 days or (x) that
obligates the Company or the LLC to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any other Person.
Each such Company Material Contract (x) is valid and binding on the parties
thereto and is in full force and effect and (y) upon consummation of the
contemplated transactions as set forth in this Agreement shall continue in full
force and effect.
(b) The Company is not in default in any material respect under any
Company Material Contract to which it is a party or by which it or any of its
properties or assets is bound.
(c) Schedule 3.13(c) sets forth all key vendors and customers of the
Company and the LLC.
3.14. LLC Oil and Gas Properties.
(a) The Company has furnished Buyer with a copy of the Company
Reserve Reports. The factual, non-interpretive data on which the Company Reserve
Reports were based for purposes of estimating the oil and gas reserves set forth
in the Company Reserve Reports and in any supplements thereto or update thereof
furnished to Buyer was accurate.
(b) The LLC has Defensible Title in and to the oil and gas
properties forming the basis for the proved reserves reflected in the Company
Reserve Reports (the "LLC Oil and Gas Properties"), free and clear of any
Encumbrances, except Permitted Encumbrances (as defined in (d) below).
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(c) As used herein, the term "Defensible Title" means such interest
in production from the LLC Oil and Gas Properties in the Company Reserve Reports
that entitles the holder thereof to receive not materially less than the
interest set forth in the Company Reserve Reports with respect to such property
under the caption "Revenue Interest" or "NRI" without reduction during the life
of such property except as stated in such reserve report; and obligates the
holder thereof to pay costs and expenses relating to each such property in a
proportion not materially greater than the interest set forth under the caption
"Working Interest" or "WI" in the Company Reserve Reports with respect to such
property, without increase over the life of such property except as shown on the
Company Reserve Reports.
(d) As used herein, the term "Permitted Encumbrances" shall mean:
(i) lessors' royalties, overriding royalties, division orders,
reversionary interests and net profits and similar burdens which do not operate
to reduce the net revenue interests in any property below those set forth in the
Company Reserve Reports;
(ii) the terms and conditions of the Leases related to the LLC
Oil and Gas Properties and all agreements, orders, instruments and declarations
to which the Leases are subject and that are customary and acceptable in the oil
and gas industry in the area of the particular property;
(iii) liens arising under operating agreements, pooling,
unitization or communitization agreements, and similar agreements of a type and
nature customary in the oil and gas industry and securing payment of amounts not
yet delinquent;
(iv) liens securing payments to mechanics and materialmen, and
liens securing payment of taxes or assessments, which liens are not yet
delinquent or, if delinquent, are being contested in good faith in the ordinary
course of business;
(v) conventional rights of reassignment obligating the Company
to reassign its interests in a portion of the LLC Oil and Gas Properties to a
third party in the event the Company intends to release or abandon such
interest;
(vi) calls on or preferential rights to purchase production at
not less than prevailing prices;
(vii) covenants, conditions, and other terms to which the LLC
Oil and Gas Properties are subject that are not such as to materially interfere
with the operation, value, use and enjoyment of the LLC Oil and Gas Properties;
(viii) rights reserved to or vested in any Governmental or
Regulatory Authority to control or regulate any of the LLC Oil and Gas
Properties in any manner, and all applicable laws, rules, regulations and orders
of any such Governmental or Regulatory Authority; and
(ix) easements, rights-of-way, servitudes, permits, surface
leases, and other surface uses on, over or in respect of any of the LLC Oil and
Gas Properties that would not materially interfere with the operation of the LLC
Oil and Gas Properties.
(e) The Leases are in good standing, valid and effective and all
royalties, rentals and other payments due by the LLC to any lessor of any such
leases have been properly paid. All major items of operating equipment of the
Company and the LLC are in good operating condition and in a state of reasonable
maintenance and repair, ordinary wear and tear excepted.
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(f) Schedule 3.14 sets forth the Company's material future, hedge,
swap, collar, put, call, floor, cap, option and other contracts intended to
benefit from, relate to or reduce or eliminate the risk of fluctuations in the
price of hydrocarbons as of the date hereof.
(g) Except for gas balancing agreements containing customary
provisions, the LLC is not obligated under, by virtue of a prepayment
arrangement, a "take or pay" arrangement, a production payment or any other
arrangement, to deliver hydrocarbons produced from the LLC Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor. Schedule 3.14 sets forth the net amount that the LLC Oil and Gas
Properties are, in the aggregate, either "over-produced" or "under-produced."
(h) Other than as expressly set forth in this Section 3.14, the
Company makes no representation or warranty, and hereby disclaims any
representation or warranty, that the reserve estimates, cost and cash flow
estimates, oil and gas commodity price estimates, other price estimates or
production or flow rate estimates contained in the Company Reserve Reports, or
in any supplement thereto or update thereof, are complete, accurate or not
misleading, such estimates being predicted as to future events which are
inherently subject to incompleteness, inaccuracy and uncertainty.
3.15. Environmental Matters. The Company and the LLC are in
substantial compliance with all applicable Environmental Laws, and neither the
Company nor the LLC has received any order, notice, or other communication
regarding a current, unresolved violation of any applicable Environmental Law
from (a) any Governmental or Regulatory Authority, or (b) the current or prior
owner or operator of any Site. No Site is a current or proposed Environmental
clean-up Site, and there are no liens, restrictions, assessments or easement or
any other encumbrance under or pursuant to any Environmental Law on any Site. To
the Company's knowledge, there is no (i) underground storage tank, active or
abandoned; (ii) polychlorinated biphenyl-containing equipment; (iii)
asbestos-containing material; (iv) radon; (v) lead-based pain; or (vi) urea
formaldehyde at any Site. There have been no environmental investigations,
studies, audits, tests, review or other analyses conducted by the Company with
respect to any Site which have not been delivered to Buyer prior to execution of
this Agreement. None of Company, LLC, any predecessor of Company or LLC, or any
entity previously owned by Company or LLC is subject to any Environmental
Liabilities.
For purposes of this Section 3.15, "Environmental Liabilities" means
any cost, damages, expense, liability, obligation, or other responsibility
arising from or under Environmental Law and consisting of or relating to:
(a) any environmental conditions or pollution (including on-site or
off-site contamination and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative Proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law; or
(c) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law.
The terms "removal," "remedial," and "response action," include the types
of activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended.
3.16. ERISA Compliance. The Company has no Benefit Plan, Plan or
Multiemployer Plan.
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For purposes of this Section 3.16, the following defined terms shall
apply:
"Benefit Plan" means any "employee benefit plans" (as defined in Section
3(3) of ERISA), bonus, pension, profit sharing, deferred compensation, incentive
compensation, excess benefit, stock, stock option, severance, termination pay,
change in control or other material employee benefit plans, programs,
arrangements or agreements currently maintained, or contributed to, or required
to be maintained or contributed to, by the Company or any Person that, together
with the Company, is treated as a single employer under Section 414 of the Code
for the benefit of any current or former employees, officers, directors or
independent contractors of the Company and with respect to which the Company has
any liability.
"Controlled Group" means all members of a controlled group of corporations
or other business entities and all trades or businesses (whether or not
incorporated) under common control which, together with the Company, are treated
as a single employer under Section 414 of the Code.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Company or any member
of the Controlled Group is a party to which more than one employer is obligated
to make contributions.
"Plan" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Company or any member of the Controlled Group may have any
liability.
3.17. Employee and Labor Matters.
(a) There is no labor strike, dispute, slowdown, work stoppage or
lockout actually pending against or affecting the Company and, during the past
12 months, there has not been any such action;
(b) the Company is not a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Company;
(c) none of the employees of the Company are represented by any
labor organization and the Company has no knowledge of any current union
organizing activities among the employees of the Company;
(d) there is no unfair labor practice charge or complaint against
the Company pending before the National Labor Relations Board;
(e) there is no grievance or arbitration proceeding arising out of
any collective bargaining agreement or other grievance procedure relating to the
Company pending before the National Labor Relations Board;
(f) there are no pending citations, relating to the Company before
the Occupational Safety and Health Administration;
(g) there are no pending claims by any current or former employee of
the Company or any employment-related claims or investigations by any
Governmental or Regulatory Authority, including any charges to the Equal
Employment Opportunity Commission or state employment practice agency,
investigations regarding compliance with federal, state or local wage and hour
laws, audits by the Office of Federal Contractor Compliance Programs, complaints
of sexual harassment or any other form of unlawful harassment, discrimination,
or retaliation; and
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(h) in the last 12 months, the Company has not effectuated (i) a
"plant closing" (as defined in the Worker Adjustment and Retraining Notification
Act of 1988 ("WARN Act")) affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of the
Company, or (ii) a "mass layoff" (as defined in the WARN Act) affecting any site
of employment or facility of the Company, nor has the Company been affected by
any transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local law.
3.18. Certain Payments. The Company has not directly or indirectly,
in violation of applicable Law, made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback or other payment to any Person, private or
public, regardless of form, whether in money, property, or services (a) to
obtain favorable treatment in securing business; (b) to pay for favorable
treatment for business secured; or (c) to obtain special concessions or for
special concessions already obtained, for or in respect of the Company.
3.19. Compliance with Laws; Permits. (a) The Company has complied
with, is not in violation of, and has not received any notices of violation with
respect to, any applicable Law with respect to the conduct of its business or
the ownership or operation of its business; and (b) the Company has all permits,
licenses, easements, variations, exemptions, consents, certificates, approvals,
authorizations and registrations (collectively, "Permits") with and under all
federal, state and local Laws, and from all Governmental or Regulatory
Authorities required by it to carry on its business as currently conducted.
3.20. No Integrated Offering; Past Compliance with Securities Laws.
Neither the Company, nor any of its Affiliates, nor any person acting on its or
their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under circumstances within
the prior six months that would require registration under the Securities Act of
the delivery of the Shares to the Buyer. Since May 7, 2003, the Company has
conducted all offerings of shares of its capital stock and consummated all
issuances of shares of its capital stock in compliance with all requirements the
securities Laws, including the Securities Act. To the Company's knowledge after
reasonable inquiry, there are no rights of rescission available to any Person,
and no basis for any claim against the Company by any Person exists, with
respect to the Company's issuances of shares of its capital stock.
3.21. No Brokers. The Company has taken no action that would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby, except as described on Schedule 3.21.
3.22. Insurance. Neither the Company nor the LLC maintains insurance
of any type.
3.23. No General Solicitation. Since May 7, 2003, neither the
Company nor, to the knowledge of the Company, any person acting for the Company,
has conducted any "general solicitation" (as such term is defined in Regulation
D) with respect to any of the Common Stock being offered hereby.
3.24. No Agreement for Sale Proceeds. The Company has not entered
into any agreement, arrangement or commitment whereby the Company would be
obligated to apply the proceeds from the Closing to redeem any outstanding
shares of its capital stock or pay any dividend or distribution with respect of
any of Company's shares of capital stock.
3.25. Application of Takeover Protections; Rights Agreement. The
transactions contemplated by this Agreement, including without limitation the
sale and delivery of the Shares, will not trigger any control share acquisition,
business combination, or other similar anti-takeover provision under the
Articles of Incorporation or the laws of the state of the Company's
incorporation. The Company does not have a "poison pill" or stockholder rights
plan in effect.
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3.26. Investment Company Status. The Company is not and upon
consummation of the sale of the Shares will not be an "investment company," a
company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
3.27. Disclosure. No representation or warranty made by Company
and/or the LLC that is contained in this Agreement, and no statement contained
in any schedule to this Agreement furnished to Buyer pursuant to any provision
of this Agreement or in any of the closing documents delivered by Company
pursuant to this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading..
3.28. Subsequent Xxxxx. With respect to all xxxxx located on the
property covered under the Welder Property Lease and under the options to lease
additional acreage from the Welder family that are drilled subsequent to the
"Initial Well" described in the Participation Letter Agreement, VOG may not,
without the prior approval and consent of the LLC, take any action or enter into
any agreements or understandings which would reduce below 85% the Company's
working interest in all such xxxxx.
ARTICLE IV
COVENANTS
4.1. Best Efforts. Each party shall use its best efforts to satisfy
in a timely fashion each of the conditions to be satisfied by it under Articles
VI and VII of this Agreement.
4.2. Form D; Blue Sky Laws. The Company shall file a Notice of Sale
of Shares on Form D with respect to the Shares, if required under Regulation D.
The Company shall take such action as it reasonably determines to be necessary,
if any, to qualify the Shares for sale to the Buyer under this Agreement under
applicable securities (or "blue sky") laws of the states of the United States
(or to obtain an exemption from such qualification).
4.3. Reporting Status. The Common Stock is registered under Section
12 of the Exchange Act. Prior to May 15, 2006, the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination.
4.4. Expenses. Except as set forth in Section 4.5, the Company, the
LLC and Buyer are liable for, and shall pay, their own expenses incurred in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the other agreements to be executed in connection herewith,
including, without limitation, attorneys' and consultants' fees and expenses.
4.5. Taxes. All Returns not required to be filed on or before the
date hereof (i) will be filed when due in accordance with all applicable laws
and (ii) as of the time of filing will correctly reflect the facts regarding the
income, business, assets, operations, activities and status of the company, its
subsidiaries and any other information required to be shown therein. Neither the
Company nor any subsidiary shall reserve any amount for or make any payment of
Taxes to any person or any Taxing Authority, except for such Taxes as are due or
payable or have been properly estimated in accordance with applicable law as
applied in a manner consistent with past practices. All transfer, documentary,
sales, use, stamp, registration, value added and other such Taxes and fees
(including any penalties and interest) incurred in connection with this
Agreement (including any real property transfer tax and any similar Tax) shall
be paid by Company when due, and Company will, at its own expense, file all
necessary Tax returns and other documentation with respect to all such Taxes and
fees, and, if required by applicable law, Buyer will, and will cause its
Affiliates to, join in the execution of any such tax returns and other
documentation. All Unfiled Returns will be filed no later than three (3) weeks
following the Closing Date.
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4.6. No Integration. The Company will not make any offers or sales
of any security (other than the Company Shares) under circumstances that would
cause the offering of the Company Shares to be integrated with any other
offering of securities by the Company (i) for the purpose of any shareholder
approval provision applicable to the Company or its securities or (ii) for
purposes of any registration requirement under the Securities Act.
4.7. Sales by Buyer. Buyer will sell any Shares in compliance with
applicable prospectus delivery requirements, if any, or otherwise in compliance
with the requirements for an exemption from registration under the Securities
Act and the rules and regulations promulgated thereunder. Buyer shall not make
any sale, transfer or other disposition of the Shares in violation of federal or
state securities laws.
4.8. Certain Key Employees. The Company shall retain certain key
employees, namely Xxxx Xxxxxx, Xxxxx Xxxxx and Xxxxxxx Xxxxx, to continue to be
involved in the management of the Company's affairs for a period of at least one
(1) year from the Closing Date pursuant to employment agreements and
noncompetition and nonsolicitation agreements to be executed and delivered on
the Closing Date in substantially the form attached hereto as Exhibit C.
4.9. Due Diligence. Between the Effective Date and the earlier of
the Closing Date or the termination of this Agreement pursuant to Article V,
upon reasonable notice the Company shall (a) give Buyer and its officers,
employees, accountants, actuaries, counsel, financing sources and other agents
and representatives (collectively, the "Buyer Representatives") full access
during normal business hours to all buildings, offices, Sites and other
facilities and to all books and records of the Company and the LLC, whether
located on the premises of the Company or at another location; (b) permit Buyer
and the Buyer Representatives to make such inspections during normal business
hours as they may require; (c) cause its officers to furnish Buyer and the Buyer
Representatives such financial, operating, technical, actuarial and cost data
and other information with respect to the business, assets, Sites and Taxes of
the Company and the LLC as Buyer and the Buyer Representatives from time to time
may request, including without limitation financial statements, schedules and
work papers; and (d) allow Buyer and the Buyer Representatives the opportunity
to interview during normal business hours such officers, employees, accountants,
actuaries, counsel and other personnel of the Company and its Affiliates;
provided, however, that no investigation pursuant to this Section 4.9 shall
affect or be deemed to modify any representation or warranty made by any of
Company and the LLC.
4.10. Confidentiality. Each of the parties hereto hereby agrees to
keep, and agrees to cause its officers, directors, employees, stockholders,
members, attorneys, investment advisors, agents, representatives, or Affiliates
to keep, the existence of this Agreement (except to the extent contemplated
hereby) and such information or knowledge obtained in any investigation pursuant
to Section 4.9, or pursuant to the negotiation and execution of this Agreement
or the effectuation of the transactions contemplated hereby, confidential;
provided, however, that the foregoing shall not apply to information or
knowledge which (a) a party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the other party, (b) is generally
known to the public and did not become so known through any violation of Law, or
a confidentiality agreement or other contractual, legal or fiduciary obligation
of confidentiality of the disclosing party or any other party with respect to
such information, (c) became known to the public through no fault of such party,
(d) is later lawfully acquired by such party without confidentiality
restrictions from other sources not bound by applicable confidentiality
restrictions, (e) is required to be disclosed by order of court or Governmental
or Regulatory Authority with subpoena powers (provided that such party shall
have provided the other party with prior notice of such order and an opportunity
to object or seek a protective order and take any other available action), (f)
is disclosed without obligation of confidentiality in the course of any Action
or Proceeding between any of the parties hereto or (g) is required to be
disclosed under applicable Law in connection with (i) any approvals required to
be obtained from Governmental or Regulatory Authorities; or (ii) the
solicitation of the approval by the shareholders of the Company of this
Agreement, all as determined in good faith by Buyer's and the Company's outside
counsel.
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4.11. No Solicitation. Until the earlier of the Closing Date or the
date of termination of this Agreement pursuant to Article V hereof, the Company
will not take, nor will the Company permit any of the Company's officers,
directors, employees, stockholders, members, attorneys, investment advisors,
agents, representatives, or Affiliates (collectively, "Representatives") to
(directly or indirectly), take any of the following actions with any Person
other than Buyer and its designees: (a) solicit, encourage, initiate, entertain,
accept receipt of, review or encourage any proposals or offers from, or
participate in or conduct discussions with or engage in negotiations with, any
Person relating to any offer or proposal, oral, written or otherwise, formal or
informal (a "Competing Proposed Transaction"), with respect to any possible
business combination with the Company or any of its subsidiaries or Affiliates
(whether such subsidiaries are in existence on the date hereof or are hereafter
organized), (b) provide information with respect to the Company to any Person,
other than Buyer, relating to (or which the Company believes would be used for
the purpose of formulating an offer or proposal with respect to), or otherwise
assist, cooperate with, facilitate or encourage any effort or attempt by any
such Person with regard to, any possible business combination with the Company
or any of its subsidiaries or Affiliates (whether such subsidiaries are in
existence on the date hereof or are hereafter organized), (c) agree to, enter
into a Contract with any Person, other than Buyer, providing for, or approve a
business combination with the Company or any of its subsidiaries or Affiliates
(whether such subsidiaries are in existence on the date hereof or are hereafter
organized), (d) make or authorize any statement, recommendation, solicitation or
endorsement in support of any possible business combination with the Company or
any of its subsidiaries or Affiliates (whether such subsidiary is in existence
on the date hereof or are hereafter organized) other than by Buyer, or (e)
authorize or permit any of the Company's Representatives to take any such
action. The Company shall immediately cease and cause to be terminated any such
contacts or negotiations with any Person relating to any such transaction or
business combination. In addition to the foregoing, if the Company receives,
prior to the Closing Date or the termination of this Agreement any offer or
proposal (formal or informal, oral, written or otherwise) relating to, or any
inquiry or contact from any Person with respect to, a Competing Proposed
Transaction, the Company shall immediately notify Buyer thereof and provide
Buyer with the details thereof, including the identity of the Person or Persons
making such offer or proposal, and will keep Buyer fully informed on a current
basis of the status and details of any such offer or proposal and of any
modifications to the terms thereof; provided, however, that this provision shall
not in any way be deemed to limit the obligations of the Company and its
Representatives set forth in the previous sentence.
4.12. Disclosure of Transactions and Other Material Information. No
later than the third business day following the Effective Date of this Agreement
the Company shall issue a press release describing the terms of the transaction
contemplated in this Agreement (the "Press Release") and shall file a report on
Form 8-K describing the terms of the transactions contemplated by this Agreement
in the form required by the 1934 Act, and attaching the Agreement and any
material Ancillary Agreement as exhibits to such filing (including all
attachments, the "8-K Filing"). Neither the Company nor Buyer shall issue any
press releases or make any other public statements (whether or not in response
to any inquiry) with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of
Buyer, to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) Xxxxx & Xxxxxxx LLP shall
be consulted by the Company in connection with any such press release or other
public disclosure prior to its release).
4.13. Amendment to Consulting Agreement. The Company shall not have
executed any additional amendments or side letters, or entered into any oral
agreements or understandings, relating to the Consulting Agreement entered into
between the Company and Altitude Group, LLC on the 11th day of February, 2004,
as amended on March 23, 2004 and April 1, 2004, which latest amendment stated
17
that at Closing, The Altitude Group, LLC shall (i) be paid a cash commission
equal to 10% of the gross proceeds received by the Company and (ii) be issued
such number of shares of Common Stock equal to 5% of the shares of the Company's
Common Stock issued and outstanding immediately before the Closing, calculated
on an as-converted, fully-diluted basis.
4.14. LLC Obligation to Obtain Certain Executed Documents. The LLC
shall obtain and deliver, or caused to be delivered, to the Company the
assurances and executed documents referred to in Section 7.11.
4.15. Board Matters. Immediately following the Closing, all
vacancies on the Company's Board of Directors shall be filled and the
reconstituted Board shall approve the execution and delivery of the Employment
Agreements referred to in Section 7.5 hereof.
ARTICLE V
TERMINATION
5.1. Termination. Except as provided in Section 5.2 below, this
Agreement may be terminated and the transaction contemplated by this Agreement
cancelled at any time prior to the Closing Date:
(a) by mutual written agreement of Buyer and the Company;
(b) by Buyer or the Company if: (i) the Closing Date has not
occurred before 5:00 p.m. (Eastern Time) on May 18, 2004 (provided,
however, that the right to terminate this Agreement under this Section
5.2(b)(i) shall not be available to any party whose willful failure to
fulfill any obligation hereunder has been the cause of, or resulted in,
the failure of the Closing Date to occur on or before such date); (ii)
there shall be a final nonappealable order of a federal or state court in
effect preventing consummation of the transaction; (iii) there shall be
any statute, rule, regulation or order enacted, promulgated or issued or
deemed applicable to the transaction by any Governmental or Regulatory
Authority that would make consummation of the transaction illegal; or (iv)
any of the approvals required to be obtained from any Governmental or
Regulatory Authority to permit the consummation of the transaction shall
be denied, and any applicable periods to appeal such decision shall have
expired (provided, however, that the right to terminate this Agreement
under this Section 5.2(b)(iv) shall not be available to any party whose
willful failure to fulfill any obligation hereunder has been the cause of,
or resulted in, the failure to obtain such approval).
(c) by Buyer if there shall be any action taken, or any Law or
Order enacted, promulgated or issued or deemed applicable to the
transaction, by any Governmental or Regulatory Authority, which would
prohibit Buyer's ownership or operation of all or any portion of the
business of the Company.
(d) by Buyer if (i) any representation or warranty of the
Company or LLC is not true and correct in any material respect either on
the date of this Agreement or at the Closing, and, if such breach of a
representation or warranty is capable of being cured, such breach shall
not have been fully cured within 15 days following delivery by Buyer to
the Company of written notice of such breach, or (ii) the Company or the
LLC shall not have complied in full with any covenant or agreement
contained in this Agreement, and, if such failure to comply is capable of
being cured, such non-compliance shall not have been fully cured within 15
days following delivery by Buyer to the Company of written notice of such
non-compliance, or (iii) any Company makes a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against
any Company seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up or reorganization, arrangement, adjustment,
protection, relief or composition of any indebtedness under any applicable
Laws; or
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(e) by the Company if (i) any representation or warranty of
Buyer is not true and correct in any material respect either on the date
of this Agreement or at the Closing, and, if such breach of a
representation or warranty is capable of being cured, such breach shall
not have been fully cured within 15 days following delivery by the Company
to Buyer of written notice of such breach, or (ii) Buyer shall not have
complied in full with any covenant or agreement contained in this
Agreement, and, if such failure to comply is capable of being cured, such
non-compliance shall not have been fully cured within 15 days following
delivery by the Company to Buyer of written notice of such non-compliance,
or (iii) Buyer makes a general assignment for the benefit of creditors, or
any proceeding shall be instituted by or against Buyer seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up
or reorganization, arrangement, adjustment, protection, relief or
composition of any indebtedness under any applicable Laws.
5.2. Effect of Termination. In the event of a valid termination of
this Agreement as provided in Section 5.1, (i) this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of the
LLC, Buyer, or the Company, or their respective officers, directors, managers,
members, shareholders or Affiliates; provided, however, that each party shall
remain liable for any breaches of this Agreement prior to its termination; and
provided further that, the provisions of Sections 4.10, 4.11, 4.12, Section 5.2
and Articles IX and X, and the applicable definitions set forth in Article VIII,
of this Agreement shall remain in full force and effect and survive any
termination of this Agreement.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligations of the Company under Article I of this Agreement are
subject to the fulfillment at or before the Closing of each of the following
conditions. These conditions are for the benefit of the Company and may be
waived by the Company in whole or in part at any time in its sole discretion:
6.1. The Buyer shall have executed this Agreement and the Ancillary
Agreements and shall have delivered such executed agreements to the Company.
6.2. The Buyer shall have delivered the purchase price for the
Shares to the Company in accordance with this Agreement.
6.3. The representations and warranties of the Buyer must be true
and correct in all material respects as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties must be correct as of such date), and
the Buyer shall have performed and complied with the covenants and conditions
required by this Agreement to be performed or complied with by the Buyer at or
prior to the Closing.
6.4. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction will have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
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ARTICLE VII
CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE
The obligation of Buyer hereunder to purchase the Shares from the
Company at the Closing is subject to the fulfillment at or before the Closing of
each of the following conditions. These conditions are for Buyer's benefit and
may be waived by Buyer at any time in its sole discretion:
7.1. The Company shall have executed this Agreement and the
Ancillary Agreements and shall have delivered such executed agreements to Buyer.
7.2. The representations and warranties of the Company and the LLC
must be true and correct in all material respects as of the Closing as though
made at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties must be true and correct as
of such date), and the Company and the LLC must have performed and complied with
the covenants, obligations and conditions required by this Agreement to be
performed or complied with by the Company and the LLC (as the case may be) at or
prior to the Closing.
7.3. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction will have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
7.4. Buyer shall have received an opinion of counsel to the Company
and to the LLC, dated as of the Closing Date, in form reasonably satisfactory to
the Buyer, addressing the matters set forth in Exhibit B hereto.
7.5. Buyer shall have received fully-executed employment agreements
in substantially the form attached hereto as Exhibit C from each of Xxxx Xxxxxx,
Xxxxx Xxxxx and Xxxxxxx Xxxxx.
7.6. Any liens or security interests placed on the Sites or the
assets of the Company shall have been released or shall have been expressly
approved by Buyer.
7.7. All consents, reviews and approvals from Governmental or
Regulatory Authorities that are necessary to complete the transactions
contemplated in this Agreement, including but not limited to Xxxx-Xxxxx-Xxxxxx
Act of 1976 requirements, will have been obtained.
7.8. Any legally required consents of any lender or financial
institution, the Board of Directors of Buyer and Company and the consent of the
shareholders of Company, shall have been obtained.
7.9. The Company's Board of Directors shall have amended the
Company's By-laws to (i) increase the number of directors to seven (7); and (ii)
designate new officer positions of Chief Executive Officer, Chief Financial
Officer and Chief Operating Officer.
7.10. The Company shall have delivered to Buyer (i) a certificate,
executed by the Chairman/CEO of the Company and dated as of the Effective Date,
certifying that the conditions set forth in Sections 7.2 have been fulfilled;
(ii) a certificate attaching (A) copies of the resolutions approving the
transactions contemplated in this Agreement as adopted by the Company's Board of
Directors, (B) the Articles of Incorporation and By-laws as in effect
immediately prior to the Effective Date; and (C) a certificate of good standing
of Company issued by the Secretary of State of the State of Delaware as of a
date not more than ten (10) days prior to the Closing Date, certified in the
case of (A) and (B) as of the Effective Date by the Secretary of the Company as
being true, correct and complete.
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7.11. The LLC shall have delivered to Buyer (i) a certificate,
executed by the Manager of the LLC and dated as of the Effective Date,
certifying that the conditions set forth in Sections 7.2 as relate to the LLC
have been fulfilled; (ii) a certificate attaching (A) copies of the resolutions
of the LLC's Manager approving the LLC's joinder to this Agreement, (B) the
Articles of Organization and Operating Agreement as in effect immediately prior
to the Effective Date; and (C) a certificate of good standing of the LLC issued
by the Secretary of State of the State of Texas as of a date not more than ten
(10) days prior to the Closing Date, certified in the case of (A) and (B) as of
the Effective Date by the Manager of the LLC as being true, correct and
complete.
7.12. The Company shall have issued an additional 58,333 shares of
Common Stock of the Company to VOG, pursuant to that certain letter agreement
dated the 25th day of March, 2004 entered into by and among the Company, VOG,
and the LLC.
7.13. Xxxxx Xxxxxxxxxxxx shall have submitted to the Company a
written notice of resignation effective as of the Closing Date pursuant to
Section 3.03 of the Company's By-laws.
7.14. Buyer shall have received an opinion of oil and gas counsel to
the Company, dated as of the Closing Date, in form reasonably satisfactory to
the Buyer, addressing the matters set forth in Exhibit D hereto.
7.15. Buyer shall have received from Company's transfer agent a
certification of all of the outstanding shares of the Company's capital stock as
of the Closing Date.
ARTICLE VIII
DEFINITIONS
8.1. "Action or Proceeding" means any action, suit, complaint,
petition, investigation, proceeding, arbitration, litigation, audit or other
proceeding, whether civil, criminal or administrative, in law or in equity, or
commenced by or before any arbitrator or Governmental or Regulatory Authority.
8.2. "Affiliate" means, as applied to any Person, (a) any other
Person directly or indirectly controlling, controlled by or under common control
with, that Person, (b) any other Person that owns or controls (i) ten percent
(10%) or more of any class of equity securities of that Person or any of its
Affiliates or (ii) ten percent (10%) or more of any class of equity securities
(including any equity securities issuable upon the exercise of any option or
convertible security) of that Person or any of its Affiliates, or (c) as to a
corporation, each director and officer thereof, and as to a partnership, each
general partner thereof, and as to a limited liability company, each managing
member or similarly authorized person thereof (including officers), and as to
any other entity, each Person exercising similar authority to those of a
director or officer of a corporation. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through
ownership of voting securities or by contract or otherwise
8.3. "Ancillary Agreements" has the meaning set forth in Section
2.2.
8.4. "Buyer" means Itera Holdings BV, a Netherlands company.
8.5. "Buyer Indemnified Party" has the meaning set forth in Section
9.2.
8.6. "Buyer Representative" has the meaning set forth in Section
4.9.
21
8.7. "Closing" means the closing of the purchase and sale of the
Shares under this Agreement.
8.8. "Closing Date" has the meaning set forth in Section 1.3.
8.9. "Code" means the Internal Revenue Code of 1986, as amended.
8.10. "Common Stock" has the meaning set forth in the Recitals.
8.11. "Company" has the meaning set forth in the introduction to
this Agreement.
8.12. "Company Material Contract" has the meaning set forth in
Section 3.13.
8.13. "Company Reserve Reports" means the report of independent
engineers, Xxxxxx Engineering Incorporated, dated November 11, 2003, as updated
on March 3, 2004, with respect to estimates of reserve and future net income for
the Sites.
8.14. "Competing Proposed Transaction" has the meaning set forth in
Section 4.11.
8.15. "Contract" means any legally binding contract, agreement,
commitment, understanding, lease, license, franchise, warranty, guaranty,
mortgage, note, bond or other instrument or consensual obligation (whether
written or oral and whether express or implied).
8.16. "Defensible Title" has the meaning set forth in Section
3.14(c).
8.17. "Environmental Law" means any federal, state, local or foreign
environmental, health and safety or other Law relating to Hazardous Materials,
including without limitation the CHM, Environmental Response Compensation and
Liability Act, the Clean Air Act, the Federal water Pollution Control Act, the
Solid Waste Disposal Act, the Federal Insecticide, Fungicide and Rodenticide
Act, and the California Safe Drinking Water and Toxic Enforcement Act.
8.18. "Exchange Act" has the meaning set forth in Section 2.2.
8.19. "Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, bureau, board, commission, department,
official or other instrumentality of the United States, any state thereof, any
foreign country or any domestic or foreign state, county, city or other
political subdivision, and shall include all self regulatory organizations,
insurance and health care authorities and any stock exchange, quotation service
and the National Association of Securities Dealers.
8.20. "Hazardous Material" means (a) any chemical, material,
substance or waste including, containing or constituting petroleum or petroleum
products, solvents (including chlorinated solvents), nuclear or radioactive
materials, asbestos in any form that is or could become friable, radon,
lead-based pain, urea formaldehyde foam insulation or polycholorinated
biphenyls; (b) any chemicals, materials, substances or wastes which are now
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants" or words of similar
import under any Environmental Law, (c) any biohazardous or biomedical waste, as
such terms are defined by the Laws of the State of Florida and the United
States, including Sections 381.0098, 381.0098(2)(a) and 395.1011 of the Florida
Statutes or (d) any other chemical, material, substance or waste which is
regulated by any Governmental or Regulatory Authority or which could constitute
a nuisance.
8.21. "Indemnifiable Losses" has the meaning set forth in Section
9.2(a).
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8.22. "Indemnified Party" has the meaning set forth in Section
9.2(d).
8.23. "Indemnifying Party" has the meaning set forth in Section
9.2(d).
8.24. "Intellectual Property" has the meaning set forth in Section
3.9.
8.25. "Law" or "Laws" means any law, statute, order, decree, consent
decree, judgment, rule, regulation, ordinance or other pronouncement having the
effect of law whether in the United States, any foreign country, or any domestic
or foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
8.26. "Leases" has the meaning set forth in Section 3.13(b).
8.27. "LLC Oil and Gas Properties" has the meaning set forth in
Section 3.14(b).
8.28. "Material Adverse Effect" means (a) a material adverse effect
on the assets, liabilities, financial condition or results of operation of the
Company and its subsidiaries, taken as a whole or (b) any effect on the ability
of the Company to perform its obligations pursuant to the transactions
contemplated by this Agreement or under the agreements or instruments to be
entered into or filed in connection herewith.
8.29. "Participation Letter Agreement" has the meaning set forth in
Section 3.7(d).
8.30. "Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association, or
Governmental or Regulatory Authority.
8.31. "Permit" has the meaning set forth in Section 3.19.
8.32. "Plans" has the meaning set forth in Section 3.3.
8.33. "Post-Closing Tax Period" means any Tax period (or portion
thereof) ending after the close of business on the Closing Date.
8.34. "Pre-Closing Tax Period" means any Tax period (or portion
thereof) ending on or before the close of business on the Closing Date.
8.35. "Regulation D" is defined in the Recitals.
8.36. "Representative" has the meaning set forth in Section 4.11.
8.37. "Returns" has the meaning set forth in Section 3.12.
8.38. "Rule 144" and "Rule 144(k)" mean Rule 144 and Rule 144(k),
respectively, as promulgated under the Securities Act, or any successor rule.
8.39. "SEC" is defined in Section 3.4(c).
8.40. "SEC Documents" has the meaning set forth in Section 3.6.
8.41. "Securities Act" is defined in the Recitals.
8.42. "Seller Indemnified Party" has the meaning set forth in
Section 9.2.
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8.43. "Shares" has the meaning set forth in the Recitals.
8.44. "Short Sales" means all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps
(including on a total return basis), and sales and any other transactions having
the effect of hedging any position in the Common Stock.
8.45. "Site" means any of the real properties (including all soil,
subsoil, surface waters and groundwater) owned, leased, occupied, used or
operated by the Company or the LLC under the Welder Property Lease.
8.46. "Tax" means (i) any tax imposed under Subtitle A of the Code
and any net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
license, withholding on amounts paid to or by the Company or any subsidiary,
payroll, employment, excise, severance, stamp, capital stock, occupation,
property, environmental or windfall profits tax, premium, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any governmental authority (a "Taxing Authority") responsible for the
imposition of any such tax (domestic or foreign); (ii) liability of the Company
or any subsidiary for the payment of any amounts of the type described in (i) as
a result of being a member of an affiliated, consolidated, combined or unitary
group, or being a party to any agreement or arrangement whereby liability of the
Company or any subsidiary for payments of such amounts was determined or taken
into account with reference to the liability of any other person; (iii)
liability of the Company or any subsidiary for the payment of any amounts as a
result of being party to any tax sharing agreement or with respect to the
payment of any amounts of the type described in (i) or (ii) as a result of any
express or implied obligation to indemnify any other Person.
8.47. "Third Party Claim" has the meaning set forth in Section
9.2(d).
8.48. "Unfiled Returns" has the meaning set forth in Section 3.12.
8.49. "Welder Property Lease" means that certain Oil and Gas Lease
and Option Agreement entered into August 22, 2003, by and between Xxxxxxxx
Xxxxxxx Xxxxxx (individually and as co-independent executrix under the Will of
Xxxxxx Xxxxxx Xxxxxxx, deceased), Xxxxx Xxxxxxx (individually and as
co-independent executor under the Will of Xxxxxx Xxxxxx Xxxxxxx, deceased),
Xxxxx Xxxxxx Ford and Xxxxx Xxxxxx Xxxxxxxx (a widow), referred to collectively
as Lessors, and the LLC as Lessee.
ARTICLE IX
INDEMNIFICATION
9.1. Survival. Notwithstanding any right of Buyer (whether or not
exercised) to investigate the affairs of the Company or any waiver by Buyer, the
LLC or the Company of any condition to Closing set forth in Articles VI or VII,
each party shall have the right to rely fully upon the representations,
warranties, covenants and agreements of the other parties contained in this
Agreement or in any instrument delivered pursuant to this Agreement. Each of the
representations and warranties made by the Buyer, Company and the LLC in this
Agreement shall continue until the first anniversary of the Closing Date (the
"Expiration Date"). No claim by any Indemnified Party for the recovery of
Indemnifiable Losses may be asserted after the Expiration Date; provided,
however, that claims for Indemnifiable Losses first asserted prior to the
Expiration Date shall not thereafter be barred. .
9.2. Indemnification.
(a) The Company and the LLC shall, jointly and severally,
indemnify and hold harmless Buyer and its Affiliates, officers, directors,
employees, agents, successors and assigns (each, a "Buyer Indemnified
Party", jointly and severally, from and against any and all Liabilities,
losses, damages, claims, costs, expenses, interest, awards, judgments and
penalties (including, without limitation, reasonable attorneys' and
consultants' fees and expenses) (collectively, "Indemnifiable Losses")
24
suffered or incurred by a Buyer Indemnified Party (including, without
limitation, any Actions or Proceedings brought or otherwise initiated by
any of them), arising out of or resulting from (i) the inaccuracy of any
representation or warranty made by any of LLC or the Company, whether
jointly or individually and contained herein or in any agreement, exhibit
or schedule attached hereto, (ii) the breach of any covenant or agreement
by the LLC or the Company, whether jointly or individually and contained
herein or in any agreement, exhibit or schedule attached hereto, (iii) any
claim, cause of action, Action or Proceeding of any third party
(including, without limitation, any Governmental or Regulatory Authority)
to the extent arising out of any action, inaction, fact, event,
circumstance, condition, liability or obligation of any of the Company or
LLC occurring or existing prior to the Closing, (iv) the failure of the
Company to comply with any applicable Laws, including all Laws promulgated
by any Governmental or Regulatory Authority, or (v) any Taxes of Company
for any Pre-Closing Tax Period, provided that the LLC shall be liable for
indemnification hereunder only for Indemnifiable Losses arising out of or
resulting from (A) the inaccuracy of any representation or warranty made
by the LLC contained herein or in any agreement, exhibit or schedule
attached hereto; (B) the breach of any covenant or agreement by the LLC
contained herein or in any agreement, exhibit or schedule attached hereto;
(C) any claim, cause of action, Action or Proceeding of any third party
(including, without limitation, any Governmental or Regulatory Authority)
to the extent arising out of any action, inaction, fact, event,
circumstance, condition, liability or obligation of the LLC occurring or
existing prior to the Closing.
(b) The Buyer shall indemnify and hold harmless each of the
Company and its Affiliates, successors and assigns (each, a "Seller
Indemnified Party") from and against any and all Indemnifiable Losses
arising out of or resulting from (i) the inaccuracy of any representation
or warranty made by Buyer, whether contained herein or in any agreement,
exhibit or schedule attached hereto, or (ii) the breach of any covenant or
agreement by Buyer, whether contained herein or in any agreement, exhibit
or schedule attached hereto.
(c) To the extent that the Company's or the LLC's undertakings
set forth in this Section 9.2 may be unenforceable, each of the Company
and the LLC shall contribute the maximum amount that it is permitted to
contribute under applicable law to the payment and satisfaction of all
Indemnifiable Losses incurred by each Buyer Indemnified Party.
(d) Any Buyer Indemnified Party or Seller Indemnified Party
(as applicable, an "Indemnified Party") shall give the indemnifying party
hereunder (as applicable, an "Indemnifying Party") notice of any matter
with respect to which an Indemnified Party determines to seek
indemnification under this Agreement, stating the amount of the
Indemnifiable Loss, if known, and method of computation thereof. The
obligations and liabilities of any Indemnifying Party under this Article
IX with respect to Indemnifiable Losses arising from claims of any third
party which are subject to the indemnification provided for in this
Article IX ("Third Party Claims") shall be governed by and contingent upon
the following additional terms and conditions: if an Indemnified Party
shall receive notice of any Third Party Claim, the Indemnified Party shall
give the Indemnifying Party notice of such Third Party Claim within 30
days of the receipt by the Indemnified Party of such notice; provided,
however, that the failure to provide such notice shall not release the
Indemnifying Party from any of its obligations under this Article IX
except to the extent the Indemnifying Party is materially prejudiced by
such failure and shall not relieve the Indemnifying Party from any other
obligation or liability that it may have to any Indemnified Party
25
otherwise than under this Article IX. The Indemnifying Party shall be
entitled to assume and control the defense of such Third Party Claim at
its expense and through counsel of its choice, subject to the approval of
the Indemnified Party, which approval shall not be unreasonably withheld,
if the Indemnifying Party gives notice of its intention to do so to the
Indemnified Party within five days of the receipt of such notice from the
Indemnified Party; provided, however, that if (i) there exists or is
reasonably likely to exist a conflict of interest, delay, or other
impairment that would make it inappropriate or inadvisable in the judgment
of the Indemnified Party, in its reasonable discretion, for the same
counsel to represent both the Indemnified Party and the Indemnifying
Party, or (ii) the Indemnifying Party shall not have engaged counsel
reasonably satisfactory to the Indemnified Party within a reasonable time
after notice of the commencement of the Third Party Claim, or shall
otherwise fail to adequately defend against such Third Party Claim, then
the Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is
required, at the sole cost and expense of the Indemnifying Party. In the
event the Indemnifying Party exercises the right to undertake any such
defense against any such Third Party Claim as provided above, the
Indemnified Party shall cooperate with the Indemnifying Party in such
defense and make available to the Indemnifying Party, at the Indemnifying
Party's expense, all witnesses, pertinent records, materials and
information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as is reasonably required by the
Indemnifying Party. Similarly, in the event the Indemnified Party is,
directly or indirectly, conducting the defense against any such Third
Party Claim, the Indemnifying Party shall cooperate with the Indemnified
Party in such defense and make available to the Indemnified Party, at the
Indemnifying Party's expense, all such witnesses, records, materials and
information in the Indemnifying Party's possession or under the
Indemnifying Party's control relating thereto as is reasonably required by
the Indemnified Party. No such Third Party Claim may be settled by any
Indemnifying Party without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld. In the event of
any claim by an Indemnified Party for an Indemnifiable Loss that does not
involve a Third Party Claim, if the Indemnifying Party disputes its
liability with respect to such claim, the Indemnifying Party and the
Indemnified Party shall proceed in good faith to negotiate a resolution of
such dispute and, if not resolved through negotiations, such dispute shall
be resolved by litigation in an appropriate court of competent
jurisdiction.
ARTICLE X
GOVERNING LAW; MISCELLANEOUS
10.1. Governing Law; Jurisdiction; Jury Trial. This Agreement shall
be governed by and interpreted in accordance with the laws of the State of
Delaware without regard to the principles of conflict of laws. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in Jacksonville, Florida (Xxxxx County) for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any Action or Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such Action or
Proceeding is brought in an inconvenient forum or that the venue of such suit,
Action or Proceeding is improper. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
10.2. Counterparts; Signatures by Facsimile. This Agreement may be
executed in two or more counterparts. Each executed counterpart will be
considered an original document, and all executed counterparts, are considered
one and the same agreement. This Agreement shall become effective as of the
Effective Date when counterparts have been signed and delivered (i) by the Buyer
to Xxxxx & Xxx Xxxxxx LLP on behalf of the Company and the LLC and (ii) by the
Company and the LLC to Xxxxx & Lardner LLP on behalf of the Buyer. This
Agreement, once executed by a party, may be delivered by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement.
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10.3. Headings. The headings of this Agreement are for convenience
of reference only, are not part of this Agreement and do not affect its
interpretation.
10.4. Severability. If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
will be deemed modified to conform with such statute or rule of law. Any
provision hereof that may prove invalid or unenforceable under any law will not
affect the validity or enforceability of any other provision hereof.
10.5. Entire Agreement; Amendments. This Agreement (including all
schedules and exhibits hereto and thereto) and the instruments contemplated
hereby and thereby constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, representations, warranties or undertakings, other than those set
forth or referred to herein or therein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof. No provision of this Agreement may be waived or amended
other than by an instrument in writing signed by the party to be charged with
enforcement.
10.6. Notices. Any notices required or permitted to be given under
the terms of this Agreement must be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and will be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by facsimile, in each case addressed to a
party. Any notice sent by courier (including a recognized overnight delivery
service) will be deemed received one business day after being sent. The
addresses for such communications are:
If to the Company or the
LLC: Dune Energy, Inc.
0000 Xxxx Xxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxxx & Xxx Xxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
If to Buyer: Itera Holdings BV
c/o Itera International Energy Corporation
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
27
With a copy to:
Xxxxx & Lardner LLP
000 X. Xxxxx Xx., Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Each party shall provide written notice to the other parties of any change in
its address.
10.7. Successors and Assigns. This Agreement is binding upon and
inures to the benefit of the parties and their successors and permitted assigns.
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Buyer, and Buyer may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company (which shall not be unreasonably withheld or
delayed).
10.8. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person or entity. It is not the intention of the parties to confer
third-party beneficiary rights, and this Agreement does not confer any such
rights upon any Person other than any Person entitled to indemnification
pursuant to Article X hereof.
10.9. Survival. The representations and warranties of the Company
and the LLC set forth herein shall survive for one (1) year following the
Closing hereunder. Neither the Company nor the LLC make any representations or
warranties in any oral or written information provided to Buyer, other than the
representations and warranties included herein.
10.10. Further Assurances. Each party will do and perform, or cause
to be done and performed, all such further acts and things, and will execute and
deliver all other agreements, certificates, instruments and documents, as
another party may reasonably request to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
10.11. No Strict Construction. The language used in this Agreement
is deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
* * * * *
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IN WITNESS WHEREOF, the undersigned Buyer and Company have caused
this Stock Purchase Agreement to be duly executed as of the date first above
written.
BUYER:
ITERA HOLDINGS BV
By: /s/ Xxxxxx Xxxxxxx
----------------------------------
Name: Xxxxxx Xxxxxxx
Title: Authorized Signatory
COMPANY:
DUNE ENERGY, INC.
By: /s/ Xxxx Xxxxxx
----------------------------------
Name: Xxxx Xxxxxx
Title: Chairman and Chief Executive
Officer
JOINING ONLY AS TO SECTIONS 4.4 AND
4.14 AND ARTICLES III, VII AND IX
SOLELY WITH RESPECT TO REFERENCES TO
THE LLC:
LLC:
VAQUERO PARTNERS, LLC
By: /s/ Xxxx Xxxxxx
----------------------------------
Name: Xxxx Xxxxxx
Title: Manager
EXHIBIT A
TOTAL PURCHASE PRICE FOR SHARES: $12,000,000
LESS: AMOUNT PAID PURSUANT TO
PARTICIPATION LETTER AGREEMENT ($1,000,000)
-----------
BALANCE OF STOCK PURCHASE PRICE DUE: $11,000,000
EXHIBIT B
Matters to be Covered in Opinion of Counsel to the Company and to the LLC
1. The Company is a corporation duly organized, validly existing and
its status is active under the laws of the State of Delaware and has the
requisite corporate power to own, lease and operate its properties and to
conduct its business as presently conducted.
2. The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and the
Ancillary Agreements including, without limitation, the issuance of the Common
Stock.
3. All necessary corporate action has been taken by the Company to
authorize the execution, delivery and performance by the Company of this
Agreement and each of the Ancillary Agreements. The execution and delivery by
the Company of each of this Agreement and the Ancillary Agreements and the
performance by it of its obligations do not violate (i) their governing
documents, if any, or (ii) to our knowledge, any applicable law, rule or
regulation of the United States or the State of Delaware.
4. The issuance and sale of the Shares have been duly authorized.
When issued in accordance with the terms of this Agreement, the Shares will be
validly issued, fully paid and non-assessable and free of all taxes, liens,
charges and preemptive rights with respect to the issue thereof.
5. Subject to the accuracy as to factual matters of the Buyer'
representations in Article II of the Agreement, the offer and sale of the Shares
in the manner contemplated by the Stock Purchase Agreement are exempt from the
registration requirements of Section 5 of the Securities Act.
6. No consent or authorization of, filing with, notice to or
registration with, any federal or state governmental body, regulatory agency,
stock exchange or market of the Company is required to be obtained by the
Company (i) to enter into and perform their respective obligations under this
Agreement and the Ancillary Agreements, (ii) for the issuance and sale of the
Common Stock as contemplated by this Agreement and the Ancillary Agreements
(except for normal post-closing filings in connection with qualifying for
exemptions from the registration requirements of applicable state securities
laws), or (iii) for the exercise of any rights and remedies under this Agreement
or any Ancillary Agreement.
7. Except as disclosed in the SEC Documents, no Action or Proceeding
before or by any court, public board or body or any governmental agency or
self-regulatory organization is pending or, to our knowledge, threatened against
the Company or any of its subsidiaries that could have a Material Adverse Effect
or that into questions the validity or enforceability of, or seeks to enjoin the
performance of, this Agreement or any Ancillary Agreement.
8. Since May 7, 2003, the Company has conducted all offerings of
shares of its capital stock and consummated all issuances of shares of its
capital stock in compliance with all requirements the securities Laws, including
the Securities Act. To our knowledge after reasonable inquiry, there are no
rights of rescission available to any Person, and no basis for any claim against
the Company by any Person exists, with respect to the Company's issuances of
shares of its capital stock.
9. The execution, delivery and performance by the Company of this
Agreement or any Ancillary Agreement, the consummation by the Company of the
transactions contemplated thereby and the compliance by the Company with the
terms thereof do not violate, conflict with or constitute a default (or an event
which, with the giving of notice or lapse of time or both, constitutes or would
constitute a default) under, give rise to any right of termination, cancellation
or acceleration under, or result in the creation of any lien, charge or
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encumbrance on or against any of the properties of the Company pursuant to (i)
the Articles of Incorporation or By-laws of the Company; (ii) any other
agreement, note, lease, mortgage, deed or other instrument which is filed with
the SEC to which the Company is a party or by which the Company is bound or
affected; or (iii) to our knowledge, any statute, law, rule or regulation
applicable to the Company or any order, writ, injunction or decree.
10. Each of this Agreement and the Ancillary Agreements has been
duly executed and delivered by or on behalf of the Company, and constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its respective terms, except as may be limited by bankruptcy,
insolvency, liquidation, reorganization, moratorium, fraudulent conveyance or
transfer or other similar laws relating to or affecting the rights of creditors
generally and except as the enforceability thereof is subject to the application
of general principles of equity (regardless of whether considered in a
proceeding in equity or at law), including, without limitation, (a) the possible
unavailability of specific performance, injunctive relief or any other equitable
remedy and (b) concepts of materiality, reasonableness, good faith and fair
dealing.
11. The LLC is a limited liability company duly organized, validly
existing and its status is active under the laws of the State of Texas and has
the requisite corporate power to own, lease and operate its properties and to
conduct its business as presently conducted.
12. The LLC has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and the
Ancillary Agreements.
13. All necessary corporate action has been taken by the LLC to
authorize the execution, delivery and performance by the LLC of this Agreement
and each of the Ancillary Agreements. The execution and delivery by the LLC of
each of this Agreement and the Ancillary Agreements and the performance by it of
its obligations do not violate (i) its governing documents; or (ii) to our
knowledge, any applicable law, rule or regulation of the United States or the
State of Texas.
14. No Action or Proceeding before or by any court, public board or
body or any governmental agency or self-regulatory organization is pending or,
to our knowledge, threatened against the LLC that could have a Material Adverse
Effect or that into questions the validity or enforceability of, or seeks to
enjoin the performance of, this Agreement or any Ancillary Agreement.
15. The execution, delivery and performance by the LLC of this
Agreement or any Ancillary Agreement and the compliance by the LLC with the
terms thereof do not violate, conflict with or constitute a default (or an event
which, with the giving of notice or lapse of time or both, constitutes or would
constitute a default) under, give rise to any right of termination, cancellation
or acceleration under, or result in the creation of any lien, charge or
encumbrance on or against any of the properties of the LLC pursuant to (i) the
Articles of Organization or Operating Agreement of the LLC; (ii) any other
agreement, note, lease, mortgage, deed or other instrument to which the LLC is a
party or by which the LLC is bound or affected; or (iii) to our knowledge, any
statute, law, rule or regulation applicable to the LLC or any order, writ,
injunction or decree.
16. Each of this Agreement and the Ancillary Agreements has been
duly executed and delivered on behalf of the LLC and constitutes a valid and
binding obligation of the LLC enforceable against the LLC in accordance with its
respective terms, except as may be limited by bankruptcy, insolvency,
liquidation, reorganization, moratorium, fraudulent conveyance or transfer or
other similar laws relating to or affecting the rights of creditors generally
and except as the enforceability thereof is subject to the application of
general principles of equity (regardless of whether considered in a proceeding
in equity or at law), including, without limitation, (a) the possible
unavailability of specific performance, injunctive relief or any other equitable
remedy and (b) concepts of materiality, reasonableness, good faith and fair
dealing.
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17. The authorized capital stock of the Company immediately before
the Closing consists of (i) 100,000,000 shares of the Common Stock, of which
15,100,757 shares were issued and outstanding, and (ii) 1,000,000 shares of
preferred stock, par value $.001 per share, 650,000 of which have been
designated as Series A Convertible Preferred Stock, of which 222,222 shares are
issued and outstanding (convertible into 444,444 shares of Common Stock). The
following are all of the Company's outstanding options, warrants, scrip, rights
to subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims, antidilution protection or other commitments or rights
of any character whatsoever that could require the Company to issue additional
shares of capital stock of the Company or adjust the purchase or exercise price
of any such instrument: (i) Stock options exercisable into 350,000 shares of
Common Stock and featuring "piggy-back" registration rights; and (ii) Promissory
notes convertible into 2,854,377 shares of Common Stock.
18. With respect to all xxxxx located on the property covered under
the Welder Property Lease and under the options to lease additional acreage from
the Welder family that are drilled subsequent to the "Initial Well" described in
the Participation Letter Agreement, Vaquero Oil & Gas, Inc. may not, without the
prior approval and consent of Vaquero Partners, LLC, take any action or enter
into any agreements or understandings which would reduce below 85% the Company's
working interest in all such xxxxx.
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EXHIBIT C
FORM OF EMPLOYMENT AGREEMENTS
FOR XXXX XXXXXX, XXXXXXX XXXXX AND XXXXX XXXXX
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of May ____, 2004 (this "Agreement") between Dune
Energy, Inc., a Delaware corporation having its principal place of business at
0000 Xxxx Xxx Xxxx., Xxxxx 0000, Xxxxxxx, Xxxxx 00000 (the "Employer" or the
"Company"), and Xxxx Xxxxxx, an individual residing in the State of Connecticut
(the "Executive").
WHEREAS, the Company and Executive desire that Executive's relationship with the
Company be governed by this Agreement and by the exhibits annexed hereto;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
1. Employment: The Employer hereby employs the Executive and the Executive
hereby accepts employment upon the terms and conditions hereinafter set forth.
2. Title; Responsibilities; Reporting: During the Term of this Agreement, the
Executive shall diligently and faithfully: (a) serve the Company in the capacity
of Chief Executive Officer, and/or in whatever similar executive capacities as
shall from time to time be assigned to the Executive by the Company's Board of
Directors or by such other person(s) as directed by the Board of Directors; (b)
report directly to the Company's Board of Directors; (c) discharge and carry out
all duties and responsibilities as may from time to time be assigned, and such
directions as may from time to time be given, to the Executive by the Company's
Board of Directors and (d) abide by and carry out the policies and programs of
the Company in existence or as the same may be changed from time to time. For so
long as the Executive shall be employed hereunder, he shall be nominated as a
Director and such nomination shall be submitted to a vote by the shareholders of
the Company.
3. Exclusivity: All services to be provided by the Executive under this
Agreement shall be performed by the Executive personally. During the term of
this Agreement, the Executive shall devote substantially all of the Executive's
business time, attention and energies and all of his skills, learnings and best
efforts to the business of Company. At all times during the term of this
Agreement, the services required of Executive and the location at which he
performs such services shall not require that he reside outside of the State of
Connecticut, except for travel in the ordinary course of business.
4. Term: The initial term of this Agreement shall commence as of May __, 2004
(the "Commencement Date") and shall end on May 31, 2005, unless sooner extended
by agreement of the parties or terminated in accordance with the provisions of
this Agreement. The date on which this Agreement is scheduled to expire (i.e.
May 31, 2005 or such later date to which this Agreement may be extended by
agreement of the parties) is referred to as the "End Date". No more than one
hundred twenty (120) nor less than and sixty (60) days prior to the an End Date
(each such sixty (60) day period is referred to as a "Renegotiation Period"),
the Company and the Executive may agree in writing to extend this Agreement for
an additional term. If during any Renegotiation Period the Company and Executive
fail to agree upon an extension of this Agreement, this Agreement shall
terminate as of the End Date of the then current term notwithstanding the
provision of services by Executive after the end of the then current term. The
term of this Agreement, whether as originally scheduled, extended by agreement
or shortened pursuant to a termination in accordance herewith is referred to as
the "Term."
5. Base Compensation: The Employer shall pay to the Executive a base salary at
the rate of $350,000 per year, subject to increase at the discretion of the
Board of Directors of the Company. The salary shall be paid in monthly
installments on the first day of each month and shall be subject to such
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deductions by the Employer as are required to be made pursuant to law,
government regulations or order. The Executive understands and agrees that the
Executive is an exempt Executive as that term is applied for purposes of Federal
or State wage and hour laws, and further understands that the Executive shall
not be entitled to any compensatory time off or other compensation for overtime.
6. Performance Bonus: The Executive shall be eligible to earn a performance
bonus with respect to each fiscal year of the Company's operation that ends
during the Term of this Agreement, based on the Company's EBITDA (earnings
before interest, taxes, depreciation/depletion and amortization) during such
fiscal year, as calculated by the Company's auditors in accordance with
generally accepted accounting principles. For the current fiscal year ending
December 31, 2004, the Executive will be entitled to receive a performance bonus
equal to two percent (2%) of the Company's EBITDA, up to $10,000,000 and one
percent (1%) of EBITDA above $10,000,000. (By way of example, if the Company's
EBITDA for the year ended December 31, 2004 is $14,000,000, then Executive will
be entitled to a performance bonus of .02 X $10,000,000 plus .01 X $4,000,000 =
$240,000). During subsequent fiscal years during the Term of this Agreement, the
Executive will be entitled to receive a performance bonus equal to two percent
(2%) of the Company's EBITDA, up to $15,000,000 and one percent (1%) of EBITDA
above $15,000,000. Performance bonuses earned hereunder shall be payable in cash
thirty (30) days after delivery by the Company's auditors of audited financial
statements for such fiscal year, but in no event later than sixty (60) days
after the end of the applicable fiscal year. Where the Executive's employment
hereunder is terminated prior to the end of a fiscal year by reason of death,
"Disability" (as defined on Exhibit A attached hereto), expiration of the term
hereof, "Termination Without Cause" (as defined in Section 19 below), or
"Resignation for Good Reason" (as defined in Section 18 below), then the
Executive shall still be eligible for payment of a performance bonus for such
fiscal year, provided that the amount of such performance bonus shall equal the
product of (i) the amount of the performance bonus that would have been payable
for the entire fiscal year had the Executive remained employed for the entire
fiscal year and (ii) a fraction, the numerator of which shall equal the number
of days the Executive was employed hereunder during such fiscal year and the
denominator of which shall equal 365.
7. Issuance of Additional Shares of Common Stock: At no time shall the number of
shares of Common Stock currently held by the Executive or acquired pursuant to
this Agreement, constitute less than five percent (5%) of the Company's issued
and outstanding shares of Common Stock on a fully-diluted, as converted basis.
If the Company issues additional shares of Common Stock, or securities
convertible into shares of Common Stock to any third party after the date
hereof, then the Company shall likewise cause to be issued to the Executive,
such additional number of shares of Common Stock as are necessary to maintain
Executive's five percent (5%) equity ownership in the Company.
8. Fringe Benefits: During the Term of this Agreement, the Executive shall be
entitled to major medical and full hospital insurance for the Executive, his
spouse and immediate dependents, provided that the Executive and his family are
insurable at "standard rates". The Executive shall also be entitled to such
disability, life insurance, and other similar benefits as may be made available
to other senior officers of the Company under such group benefit plans and/or
programs as may be maintained by the Company from time to time, subject to any
eligibility, copayment and waiting period requirements under or applicable to
any such benefit plans and/or programs. The Executive acknowledges and agrees
that the Company has the right, in its sole discretion, to amend, modify or
terminate any such benefit plan or program at any time and for any reason or for
no reason. The Executive's entitlement to such benefits shall end upon the
termination of his employment with the Company, however caused, except as
provided (a) by applicable law or (b) by the express terms of any such group
benefit plan or program maintained by the Company.
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9. Vacation, Etc.: During the Term of this Agreement, the Executive shall be
entitled to six (6) weeks paid vacation to be taken at such time or times as
shall be consistent with the proper performance by the Executive of his duties,
and which shall accrue ratably during the fiscal year. No unused vacation,
holidays, sick leave or personal days may be carried forward from year to year.
In the event that the Executive's employment terminates by virtue of
"Termination Without Cause", "Resignation for Good Reason", death or disability,
then the Executive shall be entitled to payment for any accrued but unused
vacation days during the year such termination occurs.
10. Expense Reimbursement; Travel Policy: The Company shall provide the
Executive with such reasonable business lodging and travel expense
reimbursements as are consistent with the Company's policies in effect from time
to time as they pertain to senior officers of the Company. All reimbursements by
the Company provided for in this Agreement are conditioned upon the Executive's
submission to the Company of reasonably satisfactory documentation and an
itemized account for such expenses within a reasonable period after they are
incurred. Expense reports and requests for reimbursement which are submitted
later than two months after the expense is incurred will not be reimbursed
without the approval of the Company's Chief Financial Officer.
11. Other Benefit Plans: As soon as practicable following the execution hereof,
the Company shall obtain D&O insurance if available. Within six months of the
date hereof the Company may adopt such stock option plans, and retirement
savings plans and similar benefit plans as the Board deems appropriate.
Executive shall be eligible to participate in such plans.
12. Death of Executive: In the event of the Executive's death during the Term of
this Agreement, the Employer's obligations and agreements under this Agreement
shall automatically terminate as of the date of such death, and in full
satisfaction thereof, the Company shall pay to the Executive's estate any base
salary and pro rata performance bonus earned and unpaid through the date of such
death and any business expenses or other fringe benefits or otherwise due to
Executive. The Executive's estate shall also be entitled to payment for (i) any
bonus earned in the year preceding such termination but not yet paid and (ii)
accrued but unused vacation days during the year such termination occurs. Such
event shall not be deemed a "Termination Without Cause" as defined below.
13. Disability of Executive: If the Executive shall, during the term of this
Agreement, suffer a "Disability," (as defined, from time to time, in a
disability plan that the Company may maintain for the benefit of its senior
officers (a "Disability Plan") or, whenever no such Disability Plan exists, as
defined in accordance with the meanings on Exhibit A hereto), then the Employer
shall have the right to terminate this Agreement by written notice of such
Disability to the Executive, whereupon the Employer's obligations and agreements
under this Agreement shall automatically terminate as of the date of such
notice, and in full satisfaction thereof, the Company shall pay to the Executive
any base salary and pro rata performance bonus earned and unpaid through the
date of such notice (less any payments received by the Executive under a
Disability Plan) and any business expenses or other fringe benefits otherwise
due to Executive. Executive shall also be entitled to payment for (i) any bonus
earned in the year preceding such termination but not yet paid and (ii) accrued
but unused vacation days during the year such termination occurs. No such
termination shall be deemed a "Termination Without Cause" as defined below. All
other obligations of the Employer under this Agreement shall automatically
cease, and the Executive shall not be entitled to any other salary, payments or
benefits otherwise payable under this Agreement, except as otherwise required by
law.
14. Resignation Notice; Termination: The Executive agrees to give sixty (60)
days' prior written notice to the Company of any decision by the Executive to
resign during the term of this Agreement (such notice hereinafter referred to as
a "Resignation Notice"), provided, however, that in the case of the Executive's
resignation for "Good Reason" as defined in Section 17 below, only fourteen (14)
days' prior written notice shall be required. The Executive acknowledges and
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understands that these notice periods are for the exclusive benefit of the
Company, and do not confer any employment obligation on the Company. If the
Company receives any such Resignation Notice, the Company may elect, in its sole
discretion and for any reason or for no reason, to terminate the Executive's
employment, either immediately or at any point during the period indicated in
such notice.
15. Post-Resignation Actions: If the Executive decides to resign from the
Executive's employment with the Company, the Executive agrees to make no public
announcement and no statement to persons or entities doing business with the
Company concerning the Executive's departure prior to the Executive's
termination date without the written consent of the Company, and to continue
faithfully performing and discharging the Executive's duties and
responsibilities for the Company from the date of such Resignation Notice until
such termination date.
16. Post-Resignation Obligations: Except as provided below with respect to
resignations for "Good Reason," no such resignation (or termination by the
Company following a Resignation Notice) shall be deemed to be or treated as if
it was a "Termination Without Cause" as defined below. The Executive agrees and
understands that, in the event of any such resignation (or termination by the
Company following a Resignation Notice), the Executive shall be entitled to
receive the Executive's base salary from the Employer at the rate provided in
this Agreement through the date of termination of the Executive's employment and
any business expenses otherwise due to Executive. The Executive shall also be
entitled to payment for any (i) bonus earned in the year preceding such
resignation but not yet paid and, in the event of a "Resignation for Good
Reason", accrued but unused vacation days during the year such resignation
occurs. All other obligations of the Employer under this Agreement shall
automatically cease, and the Executive shall not be entitled to any other
salary, payments or benefits otherwise payable under this Agreement, except as
otherwise required by law. The parties further agree and understand that, in the
event of any such resignation (or termination by the Company following a
Resignation Notice), the Executive's obligations and agreements under Sections
21 through 24 hereof shall continue in full force and effect in the manner and
on the terms set forth herein.
17. Resignation for Good Reason: If the Executive resigns for "Good Reason" (as
defined below), then such a resignation (a "Resignation for Good Reason") shall
be treated hereunder as if it were a "Termination Without Cause" as defined in
Section 18 below. "Good Reason" means any of the following failures or
conditions which shall remain uncured twenty (20) days after written notice of
such failure or condition is received by the Company from the Executive: (i) the
failure of the Company to continue the Executive in the position of the Chief
Executive Officer of the Company (or such other senior executive position as may
be offered by the Company and which the Executive in his sole discretion may
accept); (ii) material diminution by the Company of the Executive's
responsibilities, duties, or authority in comparison with the responsibilities,
duties and authority held during the six month period following the Commencement
Date, or assignment to the Executive of any duties inconsistent with the
Executive's position as the senior executive officer of the Company (or such
other senior executive position as may be offered by the Company and which the
Executive in his sole discretion may accept); (iii) failure by the Company to
pay and provide to the Executive the compensation and benefits provided for in
this Agreement; or (iv) the requirement that Executive relocate his residence
outside of the State of Connecticut.
18. Termination Without Cause: The Executive's employment under this Agreement
may be terminated at any time by the Company, without cause, upon fourteen (14)
days' written notice to the Executive (such termination referred to throughout
this Agreement as a "Termination Without Cause"). In the event of any such
Termination Without Cause, the Company agrees to pay to the Executive as
severance pay, an amount equal to two (2) years' base salary (at the then
current rate), pro rata performance bonus earned and unpaid through the date of
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such termination and any business expenses and other fringe benefits otherwise
due to the Executive (the "Severance Payment"). The Severance Payment shall be
payable in twenty-four (24) equal monthly installments commencing on the first
day of each month following the date of termination, provided that the Executive
adheres to his obligations hereunder and in no way disparages the Company, its
officers, directors or affiliates. The Executive shall also be entitled to
payment for (i) any bonus earned in the year preceding such termination but not
yet paid and (ii) accrued but unused vacation days during the year such
termination occurs. All other obligations of the Employer under this Agreement
shall automatically cease, and the Executive shall not be entitled to any other
salary, payments or benefits otherwise payable under this Agreement, except as
otherwise required by law.
19. Termination For Cause: The Employer, upon a vote of the Company's Board of
Directors (excluding the Executive) shall be entitled to immediately terminate
the Executive's services in any of the following circumstances, each of which
shall constitute "cause" for such termination:
(a) the breach by Executive, in any material respect, of this Agreement
(including, without limitation, the refusal or other failure by Executive to
perform any of Executive's duties hereunder other than a failure to perform
resulting from death or physical or mental disability) and failure by Executive
to cure such breach within ten (10) days of written notice thereof from the
Company;
(b) the commission by Executive of any act of dishonesty, fraud, intentional
material misrepresentation or moral turpitude in connection with his employment,
including, but not limited to, misappropriation or embezzlement of any funds of
the Company or any of its affiliates;
(c) the commission by Executive of any (1) willful misconduct or gross
negligence, or (2) intentional act having the effect of injuring the reputation,
business or business relationships of the Company or any of its affiliates, and
which intentional act would not reasonably be deemed to be in the best interests
of the Company;
(d) the entering by the Executive of a plea of guilty or nolo contendere to, or
the conviction of Executive for, a crime (other than a routine traffic offense)
which carries a potential penalty of imprisonment for more than ninety (90) days
and/or a fine in excess of Ten Thousand Dollars ($10,000);
(e) Executive's abuse of alcohol, prescription drugs or controlled substances to
a degree which interferes with his performance on behalf of the Company;
(f) Executive's deliberate disregard of any lawful material rule or policy of
the Company or order of the Company's Board of Directors and failure to cure the
same within ten (10) days of written notice thereof from the Company; or
(g) excessive absenteeism of Executive other than for reasons of illness, after
written notice from the Company with respect thereto.
If the Executive is terminated for any of the causes referred to in the
above sub-paragraphs (a) through (g), all obligations of the Employer under this
Agreement (except for obligations specifically referred to as continuing) shall
automatically cease, and the Executive shall not be entitled to any salary,
payments or other benefits otherwise payable under this Agreement that arise
after the last day of employment. The Executive shall be entitled to payment for
any bonus earned in the year preceding such termination but not yet paid. The
parties further agree and understand that, in the event of any such Termination
for Cause, the Executive's obligations and agreements under Sections 21 through
24 hereof shall continue in full force and effect in the manner and on the terms
set forth herein.
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20. Payment Upon Expiration of Term: In the event that this Agreement expires by
the arrival of an End Date without a prior termination or resignation, the
Company agrees to pay to the Executive his base salary and pro rata performance
bonus earned and unpaid through the date of such expiration and any business
expenses or fringe benefits otherwise due to the Executive. Executive shall also
be entitled to payment for any bonus earned in the year preceding the expiration
of the Agreement but not yet paid and accrued but unused vacation days during
the year such expiration occurs. All other payments, benefits or arrangements
provided by the Company shall cease immediately, except as otherwise required by
law or the terms of any plan maintained by the Company. Notwithstanding the
foregoing, the parties further agree and understand that, in the event of any
such expiration, the Executive's obligations and agreements under Sections 21
through 24 hereof shall continue in full force and effect in the manner and on
the terms set forth herein.
21. Noncompetition:
(a) The Executive expressly acknowledges that, in order to protect the Company,
and persons and entities that do business with the Company, it is an essential
condition of his employment that the Executive agrees that during the Term of
this Agreement and (unless this Agreement is terminated as a result of a
Termination Without Cause or a Resignation For Good Reason):
for a period of one (1) year thereafter, the Executive will not directly or
indirectly, for his own account or on behalf of any other person or as an
employee, consultant, manager, agent, broker, stockholder, director or officer
of a corporation, investor, owner, lender, partner, joint venturer, or otherwise
engage in any business which is then directly engaged in the exploration,
drilling or production of natural gas or oil, within the area contemplated in
that certain Area of Mutual Interest Agreement dated November 17, 2003 between
the Company and Vaquero Oil & Gas, Inc.;
for a period of one (1) year thereafter (i) solicit, entice or induce any
Customer (as defined below) of the Company to cease or limit its business with
the Company (except if and to the extent directed to do so by the Chairman, Vice
Chairman or Board of Directors of the Company), or to become a customer,
supplier, vendor or client of any other person (including, without limitation,
Executive, individually) or entity engaged in any activity or business
competitive with the Company if as a consequence thereof such party shall reduce
the business it does with the Company or (ii) interfere with the relationship
between the Company and any Customer, and Executive shall not cause, assist or
facilitate any person or entity in taking any such prohibited actions;
for a period of one (1) year thereafter, solicit, attempt to solicit or entice
away from the Company's employment, any employee of the Company, or disrupt or
interfere with, or attempt to disrupt or interfere with, the Company's
relationship with any such person, and Executive shall not cause, assist or
facilitate any person or entity in taking any such prohibited action;
disparage the Company or any of its shareholders, directors, officers, employees
or agents or take any actions that are harmful to the Company's goodwill with
its customers, employees or the public; and
engage in any act or practice the purpose of which is to evade the provisions of
this covenant not to compete or to commit any act which adversely affects the
business of the Company.
For purposes of this Agreement, a "Customer" of the Company shall
mean any person or entity, who or which is, or was at any time within the prior
one year period, a purchaser of goods or services from the Company, a landlord,
sublandlord, licensor, licensee or supplier of (or prospective purchaser,
landlord, sublandlord, licensor, licensee or supplier, provided the Company was
in active discussions with such party prior to the termination of this
Agreement), to or from the Company, as the case may be.
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(b) It is understood by the Executive that the covenants contained in this
Section 21 are essential elements of this Agreement and that, but for the
agreement of the Executive to comply with such covenants, the Company would not
have agreed to enter into this Agreement and would not pay Executive the agreed
compensation for his services. Executive acknowledges that the provisions of
this Section 21 are reasonable and necessary for the protection of the Company
and that enforcement of the provisions of this Section 21 shall not result in an
unreasonable deprivation of the right of Executive to earn a living. The
existence of any claim or cause of action of Executive against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. The covenants of
Executive in this Section 21 shall be construed as agreements independent of any
provision in this Agreement. In the event a court of competent jurisdiction
determines that the provisions of this Section 21 are excessively broad as to
duration, geographical scope or activity, it is expressly agreed that Section 21
shall be construed so that the remaining provisions shall not be affected, but
shall remain in full force and effect, and any such overbroad provisions shall
be deemed, without further action on the part of any person, to be modified,
amended and/or limited, but only to the extent necessary to render the same
valid and enforceable in such jurisdiction.
22. Non-Disclosure of Confidential Information:
(a) The Executive acknowledges and agrees that the Executive's services for the
Company shall bring the Executive into contact with sensitive or secret
information relating to the Company, its successors, subsidiaries, assigns,
officers, Executives, associated entities and/or agents including, but not
limited to (i) information concerning the objectives, plans, commitments,
contracts, leases, operations, executives, methods, market investigations,
surveys, research, records, and costs and prices of the Company and/or the
Company's subsidiaries or associated entities, (ii) information concerning the
identities, objectives, plans, preferences, needs, requests, specifications,
commitments, contracts, operations, methods and records of the Company's and/or
its subsidiaries' or associated entities' lenders, prospective lenders,
investors, owners and/or prospective owners, and (iii) any and all information,
trade secrets or ideas that give the Company or its subsidiaries or associated
entities the opportunity to obtain an advantage over such competitors of the
Company or of such subsidiaries or associated entities that do not know or use
such information, trade secrets or ideas (the "Confidential Information").
(b) The Executive further understands and acknowledges that Confidential
Information includes not only recorded or written information, but information
that the Executive can recall or reconstruct from the Executive's memory.
(c) The Executive agrees that he will, at all times, faithfully hold all such
Confidential Information in the strictest of confidence and will, at all times,
use his best efforts and highest diligence to keep such Confidential Information
secret, to guard against its disclosure, and never, directly or indirectly, to
disclose or divulge any such Confidential Information to any person, company,
firm or other entity, or to use the same, except that (i) the Executive may use
Confidential Information as necessary to perform his duties of employment with
the Company, (ii) the Executive may disclose Confidential Information to those
within the Company who have a need to know it in the performance of their duties
for the Company, (iii) the Executive may disclose Confidential Information to
parties outside the Company when, as and if he is expressly directed to do so by
the Executive's supervisors within the Company, and (iv) the Executive may
disclose Confidential Information as expressly directed by judicial process,
provided that the Executive has promptly, and prior to making such disclosure,
provided a copy of such judicial process to the Company and the Company does not
intervene to oppose such disclosure. The Executive shall use his best efforts to
afford the Company sufficient time to intervene to oppose any such disclosure,
including, if necessary, seeking reasonable extensions of the Executive's time
to make such disclosure.
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(d) The Executive shall continue to abide by all of his obligations under this
Agreement respecting Confidential Information not only during his employment
with the Company, but also for all time after any termination, resignation or
expiration of his employment with the Company, however caused.
(e) Notwithstanding the foregoing, after any termination or resignation of the
Executive from his employment with the Company, Confidential Information shall
not include, and the Executive shall not be restricted from divulging or using,
any information which the Executive can demonstrate (i) is or becomes generally
available to the public other than as a result of a disclosure by the Executive,
(ii) was available to the Executive on a non-confidential basis prior to its
disclosure to the Executive by the Company or any of its subsidiaries or
associated entities, or (iii) becomes available to the Executive on a
non-confidential basis from a source other than the Company or any of its
subsidiaries or associated entities, provided, however, that such source was not
bound by a confidentiality agreement with the Company or any of its subsidiaries
or associated entities, or was not otherwise prohibited from transmitting such
information to the Executive.
(f) The Executive agrees that upon any termination, resignation or expiration of
his employment with the Company, however caused, the Executive shall deliver to
the Company all writings, documents, recordings, computer discs or other media
of recordation or storage in his possession, custody or control containing any
Confidential Information (including, without limitation, all duplicates and
copies), shall relinquish access to any computer maintained by or for the
benefit of the Company or any of its subsidiaries or associated entities, and
shall purge all such Confidential Information (in whatever form, including
electronic data) from any electronic media or storage devices, including
computers, in the Executive's possession, custody or control. To insure
compliance with this Agreement, at the time of such termination, resignation or
expiration, the Executive shall provide the Company with a sworn statement, duly
notarized, that the Executive has performed each and every agreement and
obligation contained or referred to in this Section.
23. Company Property: All inventions, improvements, systems, designs, ideas,
business plans, sales techniques, approaches, surveys, prospect books,
publications, memoranda, customer lists, files, notes, records, videotapes or
any other business documentation or products (including, without limitation,
Confidential Information) that the Executive makes or conceives (either
individually or jointly with others) or that are made available to the Executive
during his employment with the Company and until any termination, resignation or
expiration of such employment for any reason, relating to and connected with his
employment, or that the Executive utilizes in carrying out his duties or
responsibilities to the Company (the "Property"), shall be the Company's
exclusive property, and the Executive assigns to the Company all of his rights,
if any, in and to all such Property.
24. Trade Names, Trademarks and Copyright: During his employment with the
Company, and continuing for all time after any termination, resignation or
expiration of such employment for any reason, the Executive agrees that he shall
never have or claim any right, title or interest in any trade name, trademark or
copyright (statutory or common law) belonging to or used by the Company, its
subsidiaries, successors, assigns or associated entities, and shall never have
or claim any right, title or interest in any material or matter of any sort,
prepared for or used in connection with advertising, solicitation, circulation,
editorial content or promotion of the business of the Company, its subsidiaries,
successors, assigns or associated entities, whether produced, prepared or
published in whole or in part by the Executive. The Executive recognizes that
the Company and/or its subsidiaries or associated entities now have and shall
hereafter have and retain sole and exclusive rights in and to any and all such
trade names, trademarks, copyrights, material and matter.
-13-
25. Injunctive Relief: The Executive expressly acknowledges and agrees that the
Property and the Confidential Information are of a special, unique, unusual,
extraordinary and intellectual character which gives them a peculiar value, and
that a breach by the Executive of any of the restrictive covenants contained in
paragraphs 21 through 24 herein will cause the Company irreparable injury and
damage for which there is no adequate remedy available at law. The Executive
further expressly acknowledges and agrees that the Company shall be entitled, in
addition to any remedies available at law, to injunctive or other equitable
relief to require specific performance, or to prevent a breach, of any provision
of this Agreement by the Executive without any requirement or showing that the
Company has suffered any damages from such breach.
26. Further Instruments: Each of the Company and the Executive shall execute,
acknowledge, deliver and procure the execution, acknowledgment and delivery to
the other of any and all further instruments which the other may reasonably deem
necessary or expedient to carry out or effectuate the purposes or intent of this
Agreement.
27. Successors and Assigns: This Agreement shall not be assignable by the
Company without the prior consent of the Executive, which shall not be
unreasonably withheld. For purposes of this Agreement a transfer of this
Agreement in connection with a merger, sale of a majority of the outstanding
shares or consolidation of the Company or a sale of substantially all of the
Company assets shall not constitute an assignment. This Agreement shall be
binding upon the successors, heirs, executors and personal representatives of
Executive. This Agreement contemplates the rendition of personal services by
Executive and is not assignable by the Executive.
28. Savings Clause: If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law. The Company's rights and remedies provided for
in this Agreement or by law shall, to the extent permitted by law, be
cumulative.
29. Governing Law and Construction: Any and all differences and disputes of
whatever nature arising out of or relating to this Agreement (including, without
limitation, the negotiation, execution, performance or termination of this
Agreement) shall be governed by the laws of the State of Delaware applicable to
contracts made, negotiated and to be performed entirely in such State without
giving effect to its principles of conflicts of laws. With respect to all such
differences and disputes, the parties agree and consent to be subject to the
exclusive jurisdiction of the state and federal courts located in the State of
Texas and consent to the exclusive venue of Texas.
30. Notices: All notices to be given under this Agreement shall be in writing
and shall be given by hand, by overnight courier services which obtain
acknowledgment of receipt or by certified or registered mail, return receipt
requested, addressed to the party receiving such notice (each of the foregoing
being referred to as "Written Notice"), or by facsimile transmission, such
transmission being effective as of the date thereof if followed within ten (10)
business days by Written Notice, as follows:
(a) if to the Company, to the Company's address set forth above, with a copy to
Xxxxx & Xxx Xxxxxx, 0 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000, Att:
Xxxxxxx X. Xxxxx, Esq;
(b) if to the Executive, to the Executive's address set forth above; or
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(c) to either party at such other addresses as shall have been specified in a
notice similarly given.
31. Freedom to Execute Agreement: The Company and the Executive each represent,
warrant and agree that they are free to enter into this Agreement, and that they
are not subject to any obligations or disability which would prevent them from
or interfere with their fully keeping and performing all of the covenants and
conditions to be kept or performed under such agreements. The Company and
Executive further represent, warrant and agree that they have not made and will
not make any grant or assignment which conflicts with or impairs the complete
enjoyment of the rights and privileges granted to the Company and the Executive
under this Agreement. The Executive has had the opportunity to consult with his
personal attorney and to negotiate this Agreement at "arms-length".
32. Entire Agreement: This Agreement and the agreements annexed as appendices
hereto are intended together to constitute the entire agreement between the
Company and the Executive relating to the subject matters of such agreements,
and all prior negotiations and understandings of the parties have been merged in
such agreements. No modification of any such agreements shall be valid unless in
writing and executed by the parties hereto. This Agreement supersedes in its
entirety the Employment Agreement between the Company and Executive dated
December 1, 2003 which is void and of no further force and effect.
33. Waiver of Breach: The waiver of a breach or default of or under any
provision of this Agreement shall not be deemed a waiver of any other such
breach or default of any kind or nature.
34. Approvals: This Agreement has been approved by the necessary vote of the
Company's Board of Directors of the Company.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date above written.
Employer: Executive:
DUNE ENERGY, INC.
By:
----------------------------- -----------------------------
Xxxxx Xxxxx Xxxx Xxxxxx
President, Chief Operating
Officer
Exhibit A
For the purposes of this Employment Agreement, whenever the term
"Disability" is not defined in a Disability Plan that the Company may maintain
for the benefit of its senior officers, that term shall mean that, for a period
of "120 continuous days", the Executive is "limited" form performing the
"material and substantial duties" of his "regular occupation" due to his
"sickness" or "injury."
For purposes of this definition:
"120 continuous days" shall mean 120 days of sickness or injury which
meets all of the other criteria for a Disability as defined herein, with no
lapse of greater than 30 days (consecutively or in the aggregate);
"limited" from performing a duty or function means that the Executive is
unable to perform such duty or function;
"material and substantial duties" means duties that are normally required
for the performance of the Executive's "regular occupation" and cannot be
reasonably omitted or modified;
"regular occupation" means all of the functions that the Executive was
routinely performing prior to the onset of the condition or conditions that
resulted in the Company's decision to terminate the Executive's employment for
reasons related to Disability;
"sickness" means any illness or disease that renders the Executive
incapable of performing material and substantial duties of his employment under
the Employment Agreement; and
"injury" means a bodily injury that is the direct result of an accident
and not related to any other cause.
-16-
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of May __, 2004 (this "Agreement") between Dune
Energy, Inc., a Delaware corporation having its principal place of business at
0000 Xxxx Xxx Xxxx., Xxxxx 0000, Xxxxxxx, Xxxxx 00000 (the "Employer" or the
"Company"), and Xxxxxxx Xxxxx, an individual residing in the State of New York
(the "Executive").
WHEREAS, the Company and Executive desire that Executive's relationship
with the Company be governed by this Agreement and by the exhibits annexed
hereto;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
1. Employment: The Employer hereby employs the Executive and the Executive
hereby accepts employment upon the terms and conditions hereinafter set forth.
2. Title; Responsibilities; Reporting: During the Term of this Agreement, the
Executive shall diligently and faithfully: (a) serve the Company in the capacity
of Chief Financial Officer, and/or in whatever similar executive capacities as
shall from time to time be assigned to the Executive by the Company's Board of
Directors or by such other person(s) as directed by the Board of Directors; (b)
report directly to the Company's Board of Directors; (c) discharge and carry out
all duties and responsibilities as may from time to time be assigned, and such
directions as may from time to time be given, to the Executive by the Company's
Board of Directors and (d) abide by and carry out the policies and programs of
the Company in existence or as the same may be changed from time to time. For so
long as the Executive shall be employed hereunder, he shall be nominated as a
Director and such nomination shall be submitted to a vote by the shareholders of
the Company.
3. Exclusivity: All services to be provided by the Executive under this
Agreement shall be performed by the Executive personally. During the term of
this Agreement, the Executive shall devote substantially all of the Executive's
business time, attention and energies and all of his skills, learnings and best
efforts to the business of Company. At all times during the term of this
Agreement, the services required of Executive and the location at which he
performs such services shall not require that he reside outside of the State of
New York, except for travel in the ordinary course of business.
4. Term: The initial term of this Agreement shall commence as of May __, 2004
(the "Commencement Date") and shall end on May 31, 2005, unless sooner extended
by agreement of the parties or terminated in accordance with the provisions of
this Agreement. The date on which this Agreement is scheduled to expire (i.e.
May 31, 2005 or such later date to which this Agreement may be extended by
agreement of the parties) is referred to as the "End Date". No more than one
hundred twenty (120) nor less than and sixty (60) days prior to the an End Date
(each such sixty (60) day period is referred to as a "Renegotiation Period"),
the Company and the Executive may agree in writing to extend this Agreement for
an additional term. If during any Renegotiation Period the Company and Executive
fail to agree upon an extension of this Agreement, this Agreement shall
terminate as of the End Date of the then current term notwithstanding the
provision of services by Executive after the end of the then current term. The
term of this Agreement, whether as originally scheduled, extended by agreement
or shortened pursuant to a termination in accordance herewith is referred to as
the "Term."
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5. Base Compensation: The Employer shall pay to the Executive a base salary at
the rate of $120,000 per year, subject to increase at the discretion of the
Board of Directors of the Company. The salary shall be paid in monthly
installments on the first day of each month and shall be subject to such
deductions by the Employer as are required to be made pursuant to law,
government regulations or order. The Executive understands and agrees that the
Executive is an exempt Executive as that term is applied for purposes of Federal
or State wage and hour laws, and further understands that the Executive shall
not be entitled to any compensatory time off or other compensation for overtime.
6. Performance Bonus: The Executive shall be eligible to earn a performance
bonus with respect to each fiscal year of the Company's operation that ends
during the Term of this Agreement, based on milestones to be established by the
Board of Directors from time to time, or as may otherwise be determined by the
Board from time to time. Performance bonuses earned hereunder shall be payable
in cash thirty (30) days after delivery by the Company's auditors of audited
financial statements for such fiscal year, but in no event later than sixty (60)
days after the end of the applicable fiscal year. Where the Executive's
employment hereunder is terminated prior to the end of a fiscal year by reason
of death, "Disability" (as defined on Exhibit A attached hereto), expiration of
the term hereof, "Termination Without Cause" (as defined in Section 16 below),
or "Resignation for Good Reason" (as defined in Section 15 below), then the
Executive shall still be eligible for payment of a performance bonus for such
fiscal year, provided that the amount of such performance bonus shall equal the
product of (i) the amount of the performance bonus that would have been payable
for the entire fiscal year had the Executive remained employed for the entire
fiscal year and (ii) a fraction, the numerator of which shall equal the number
of days the Executive was employed hereunder during such fiscal year and the
denominator of which shall equal 365.
7. Fringe Benefits: During the Term of this Agreement, the Executive shall be
entitled to major medical and full hospital insurance for the Executive, his
spouse and immediate dependents, provided that the Executive and his family are
insurable at "standard rates". The Executive shall also be entitled to such
disability, life insurance, and other similar benefits as may be made available
to other senior officers of the Company under such group benefit plans and/or
programs as may be maintained by the Company from time to time, subject to any
eligibility, copayment and waiting period requirements under or applicable to
any such benefit plans and/or programs. The Executive acknowledges and agrees
that the Company has the right, in its sole discretion, to amend, modify or
terminate any such benefit plan or program at any time and for any reason or for
no reason. The Executive's entitlement to such benefits shall end upon the
termination of his employment with the Company, however caused, except as
provided (a) by applicable law or (b) by the express terms of any such group
benefit plan or program maintained by the Company. As soon as practicable
following the execution hereof, the Company shall obtain D&O insurance and adopt
a stock option plan and retirement savings plan, consistent with levels afforded
senior management of companies comparable to the Company. Executive shall be
eligible to participate in such plans.
-18-
8. Vacation, Etc.: During the Term of this Agreement, the Executive shall be
entitled to four (4) weeks paid vacation to be taken at such time or times as
shall be consistent with the proper performance by the Executive of his duties,
and which shall accrue ratably during the fiscal year. No unused vacation,
holidays, sick leave or personal days may be carried forward from year to year.
In the event that the Executive's employment terminates by virtue of
"Termination Without Cause", "Resignation for Good Reason", death or disability,
then the Executive shall be entitled to payment for any accrued but unused
vacation days during the year such termination occurs.
9. Expense Reimbursement; Travel Policy: The Company shall provide the Executive
with such reasonable business lodging and travel expense reimbursements as are
consistent with the Company's policies in effect from time to time as they
pertain to senior officers of the Company. All reimbursements by the Company
provided for in this Agreement are conditioned upon the Executive's submission
to the Company of reasonably satisfactory documentation and an itemized account
for such expenses within a reasonable period after they are incurred. Expense
reports and requests for reimbursement which are submitted later than two months
after the expense is incurred will not be reimbursed without the approval of the
Company's Chief Executive Officer.
10. Other Benefit Plans: As soon as practicable following the execution hereof,
the Company shall obtain D&O insurance if available. Within six months of the
date hereof the Company may adopt such stock option plans, and retirement
savings plans and similar benefit plans as the Board deems appropriate.
Executive shall be eligible to participate in such plans.
11. Death of Executive: In the event of the Executive's death during the Term of
this Agreement, the Employer's obligations and agreements under this Agreement
shall automatically terminate as of the date of such death, and in full
satisfaction thereof, the Company shall pay to the Executive's estate any base
salary and pro rata performance bonus earned and unpaid through the date of such
death and any business expenses or other fringe benefits or otherwise due to
Executive. The Executive's estate shall also be entitled to payment for (i) any
bonus earned in the year preceding such termination but not yet paid and (ii)
accrued but unused vacation days during the year such termination occurs. Such
event shall not be deemed a "Termination Without Cause" as defined below.
12. Disability of Executive: If the Executive shall, during the term of this
Agreement, suffer a "Disability," (as defined, from time to time, in a
disability plan that the Company may maintain for the benefit of its senior
officers (a "Disability Plan") or, whenever no such Disability Plan exists, as
defined in accordance with the meanings on Exhibit A hereto), then the Employer
shall have the right to terminate this Agreement by written notice of such
Disability to the Executive, whereupon the Employer's obligations and agreements
under this Agreement shall automatically terminate as of the date of such
notice, and in full satisfaction thereof, the Company shall pay to the Executive
any base salary and pro rata performance bonus earned and unpaid through the
date of such notice (less any payments received by the Executive under a
Disability Plan) and any business expenses or other fringe benefits otherwise
due to Executive. Executive shall also be entitled to payment for (i) any bonus
earned in the year preceding such termination but not yet paid and (ii) accrued
but unused vacation days during the year such termination occurs. No such
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termination shall be deemed a "Termination Without Cause" as defined below. All
other obligations of the Employer under this Agreement shall automatically
cease, and the Executive shall not be entitled to any other salary, payments or
benefits otherwise payable under this Agreement, except as otherwise required by
law.
13. Resignation Notice; Termination: The Executive agrees to give sixty (60)
days' prior written notice to the Company of any decision by the Executive to
resign during the term of this Agreement (such notice hereinafter referred to as
a "Resignation Notice"), provided, however, that in the case of the Executive's
resignation for "Good Reason" as defined in Section 15 below, only fourteen (14)
days' prior written notice shall be required. The Executive acknowledges and
understands that these notice periods are for the exclusive benefit of the
Company, and do not confer any employment obligation on the Company. If the
Company receives any such Resignation Notice, the Company may elect, in its sole
discretion and for any reason or for no reason, to terminate the Executive's
employment, either immediately or at any point during the period indicated in
such notice.
14. Post-Resignation Actions: If the Executive decides to resign from the
Executive's employment with the Company, the Executive agrees to make no public
announcement and no statement to persons or entities doing business with the
Company concerning the Executive's departure prior to the Executive's
termination date without the written consent of the Company, and to continue
faithfully performing and discharging the Executive's duties and
responsibilities for the Company from the date of such Resignation Notice until
such termination date.
15. Post-Resignation Obligations: Except as provided below with respect to
resignations for "Good Reason," no such resignation (or termination by the
Company following a Resignation Notice) shall be deemed to be or treated as if
it was a "Termination Without Cause" as defined below. The Executive agrees and
understands that, in the event of any such resignation (or termination by the
Company following a Resignation Notice), the Executive shall be entitled to
receive the Executive's base salary from the Employer at the rate provided in
this Agreement through the date of termination of the Executive's employment and
any business expenses otherwise due to Executive. The Executive shall also be
entitled to payment for any (i) bonus earned in the year preceding such
resignation but not yet paid and, in the event of a "Resignation for Good
Reason", accrued but unused vacation days during the year such resignation
occurs. All other obligations of the Employer under this Agreement shall
automatically cease, and the Executive shall not be entitled to any other
salary, payments or benefits otherwise payable under this Agreement, except as
otherwise required by law. The parties further agree and understand that, in the
event of any such resignation (or termination by the Company following a
Resignation Notice), the Executive's obligations and agreements under Sections
19 through 21 hereof shall continue in full force and effect in the manner and
on the terms set forth herein.
16. Resignation for Good Reason: If the Executive resigns for "Good Reason" (as
defined below), then such a resignation (a "Resignation for Good Reason") shall
be treated hereunder as if it were a "Termination Without Cause" as defined in
Section 16 below. "Good Reason" means any of the following failures or
conditions which shall remain uncured twenty (20) days after written notice of
such failure or condition is received by the Company from the Executive: (i) the
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failure of the Company to continue the Executive in the position of the Chief
Financial Officer of the Company (or such other senior executive position as may
be offered by the Company and which the Executive in his sole discretion may
accept); (ii) material diminution by the Company of the Executive's
responsibilities, duties, or authority in comparison with the responsibilities,
duties and authority held during the six month period following the Commencement
Date, or assignment to the Executive of any duties inconsistent with the
Executive's position as the senior executive officer of the Company (or such
other senior executive position as may be offered by the Company and which the
Executive in his sole discretion may accept); (iii) failure by the Company to
pay and provide to the Executive the compensation and benefits provided for in
this Agreement; or (iv) the requirement that the Executive relocate his
residence outside of New York, New York.
17. Termination Without Cause: The Executive's employment under this Agreement
may be terminated at any time by the Company, without cause, upon fourteen (14)
days' written notice to the Executive (such termination referred to throughout
this Agreement as a "Termination Without Cause"). In the event of any such
Termination Without Cause, the Company agrees to pay to the Executive as
severance pay, an amount equal to six (6) months' base salary (at the then
current rate), pro rata performance bonus earned and unpaid through the date of
such termination and any business expenses and other fringe benefits otherwise
due to the Executive (the "Severance Payment"). The Severance Payment shall be
payable in six (6) equal monthly installments commencing on the first day of
each month following the date of termination, provided that the Executive
adheres to his obligations hereunder and in no way disparages the Company, its
officers, directors or affiliates. The Executive shall also be entitled to
payment for (i) any bonus earned in the year preceding such termination but not
yet paid and (ii) accrued but unused vacation days during the year such
termination occurs. All other obligations of the Employer under this Agreement
shall automatically cease, and the Executive shall not be entitled to any other
salary, payments or benefits otherwise payable under this Agreement, except as
otherwise required by law.
18. Termination For Cause: The Employer, upon a vote of the Company's Board of
Directors (excluding the Executive) shall be entitled to immediately terminate
the Executive's services in any of the following circumstances, each of which
shall constitute "cause" for such termination:
(a) the breach by Executive, in any material respect, of this Agreement
(including, without limitation, the refusal or other failure by Executive to
perform any of Executive's duties hereunder other than a failure to perform
resulting from death or physical or mental disability) and failure by Executive
to cure such breach within ten (10) days of written notice thereof from the
Company;
(b) the commission by Executive of any act of dishonesty, fraud, intentional
material misrepresentation or moral turpitude in connection with his employment,
including, but not limited to, misappropriation or embezzlement of any funds of
the Company or any of its affiliates;
(c) the commission by Executive of any (1) willful misconduct or gross
negligence, or (2) intentional act having the effect of injuring the reputation,
business or business relationships of the Company or any of its affiliates, and
which intentional act would not reasonably be deemed to be in the best interests
of the Company;
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(d) the entering by the Executive of a plea of guilty or nolo contendere to, or
the conviction of Executive for, a crime (other than a routine traffic offense)
which carries a potential penalty of imprisonment for more than ninety (90) days
and/or a fine in excess of Ten Thousand Dollars ($10,000);
(e) Executive's abuse of alcohol, prescription drugs or controlled substances to
a degree which interferes with his performance on behalf of the Company;
(f) Executive's deliberate disregard of any lawful material rule or policy of
the Company or order of the Company's Board of Directors and failure to cure the
same within ten (10) days of written notice thereof from the Company; or
(g) excessive absenteeism of Executive other than for reasons of illness, after
written notice from the Company with respect thereto.
If the Executive is terminated for any of the causes referred to in the
above sub-paragraphs (a) through (g), all obligations of the Employer under this
Agreement (except for obligations specifically referred to as continuing) shall
automatically cease, and the Executive shall not be entitled to any salary,
payments or other benefits otherwise payable under this Agreement that arise
after the last day of employment. The Executive shall be entitled to payment for
any bonus earned in the year preceding such termination but not yet paid. The
parties further agree and understand that, in the event of any such Termination
for Cause, the Executive's obligations and agreements under Sections 19 through
21 hereof shall continue in full force and effect in the manner and on the terms
set forth herein.
19. Payment Upon Expiration of Term: In the event that this Agreement expires by
the arrival of an End Date without a prior termination or resignation, the
Company agrees to pay to the Executive his base salary and pro rata performance
bonus earned and unpaid through the date of such expiration and any business
expenses or fringe benefits otherwise due to the Executive. Executive shall also
be entitled to payment for any bonus earned in the year preceding the expiration
of the Agreement but not yet paid and (ii) accrued but unused vacation days
during the year such expiration occurs. All other payments, benefits or
arrangements provided by the Company shall cease immediately, except as
otherwise required by law or the terms of any plan maintained by the Company.
Notwithstanding the foregoing, the parties further agree and understand that, in
the event of any such expiration, the Executive's obligations and agreements
under Sections 19 through 22 hereof shall continue in full force and effect in
the manner and on the terms set forth herein.
20. Noncompetition:
(a) The Executive expressly acknowledges that, in order to protect the Company,
and persons and entities that do business with the Company, it is an essential
condition of his employment that the Executive agrees that during the Term of
this Agreement and (unless this Agreement is terminated as a result of a
Termination Without Cause or a Resignation For Good Reason):
for a period of one (1) year thereafter, the Executive will not directly or
indirectly, for his own account or on behalf of any other person or as an
employee, consultant, manager, agent, broker, stockholder, director or officer
of a corporation, investor, owner, lender, partner, joint venturer, or otherwise
engage in any business which is then directly engaged in the exploration,
drilling or production of natural gas or oil, within the area contemplated in
that certain Area of Mutual Interest Agreement dated November 17, 2003 between
the Company and Vaquero Oil & Gas, Inc.;
-22-
for a period of one (1) year thereafter (i) solicit, entice or induce any
Customer (as defined below) of the Company to cease or limit its business with
the Company (except if and to the extent directed to do so by the Chairman, Vice
Chairman or Board of Directors of the Company), or to become a customer,
supplier, vendor or client of any other person (including, without limitation,
Executive, individually) or entity engaged in any activity or business
competitive with the Company if as a consequence thereof such party shall reduce
the business it does with the Company or (ii) interfere with the relationship
between the Company and any Customer, and Executive shall not cause, assist or
facilitate any person or entity in taking any such prohibited actions;
for a period of one (1) year thereafter, solicit, attempt to solicit or entice
away from the Company's employment, any employee of the Company, or disrupt or
interfere with, or attempt to disrupt or interfere with, the Company's
relationship with any such person, and Executive shall not cause, assist or
facilitate any person or entity in taking any such prohibited action;
disparage the Company or any of its shareholders, directors, officers, employees
or agents or take any actions that are harmful to the Company's goodwill with
its customers, employees or the public; and
engage in any act or practice the purpose of which is to evade the provisions of
this covenant not to compete or to commit any act which adversely affects the
business of the Company.
For purposes of this Agreement, a "Customer" of the Company shall
mean any person or entity, who or which is, or was at any time within the prior
one year period, a purchaser of goods or services from the Company, a landlord,
sublandlord, licensor, licensee or supplier of (or prospective purchaser,
landlord, sublandlord, licensor, licensee or supplier, provided the Company was
in active discussions with such party prior to the termination of this
Agreement), to or from the Company, as the case may be.
(b) It is understood by the Executive that the covenants contained in this
Section 19 are essential elements of this Agreement and that, but for the
agreement of the Executive to comply with such covenants, the Company would not
have agreed to enter into this Agreement and would not pay Executive the agreed
compensation for his services. Executive acknowledges that the provisions of
this Section 21 are reasonable and necessary for the protection of the Company
and that enforcement of the provisions of this Section 19 shall not result in an
unreasonable deprivation of the right of Executive to earn a living. The
existence of any claim or cause of action of Executive against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. The covenants of
Executive in this Section 21 shall be construed as agreements independent of any
provision in this Agreement. In the event a court of competent jurisdiction
determines that the provisions of this Section 19 are excessively broad as to
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duration, geographical scope or activity, it is expressly agreed that Section 19
shall be construed so that the remaining provisions shall not be affected, but
shall remain in full force and effect, and any such overbroad provisions shall
be deemed, without further action on the part of any person, to be modified,
amended and/or limited, but only to the extent necessary to render the same
valid and enforceable in such jurisdiction.
21. Non-Disclosure of Confidential Information:
(a) The Executive acknowledges and agrees that the Executive's services for the
Company shall bring the Executive into contact with sensitive or secret
information relating to the Company, its successors, subsidiaries, assigns,
officers, Executives, associated entities and/or agents including, but not
limited to (i) information concerning the objectives, plans, commitments,
contracts, leases, operations, executives, methods, market investigations,
surveys, research, records, and costs and prices of the Company and/or the
Company's subsidiaries or associated entities, (ii) information concerning the
identities, objectives, plans, preferences, needs, requests, specifications,
commitments, contracts, operations, methods and records of the Company's and/or
its subsidiaries' or associated entities' lenders, prospective lenders,
investors, owners and/or prospective owners, and (iii) any and all information,
trade secrets or ideas that give the Company or its subsidiaries or associated
entities the opportunity to obtain an advantage over such competitors of the
Company or of such subsidiaries or associated entities that do not know or use
such information, trade secrets or ideas (the "Confidential Information").
(b) The Executive further understands and acknowledges that Confidential
Information includes not only recorded or written information, but information
that the Executive can recall or reconstruct from the Executive's memory.
(c) The Executive agrees that he will, at all times, faithfully hold all such
Confidential Information in the strictest of confidence and will, at all times,
use his best efforts and highest diligence to keep such Confidential Information
secret, to guard against its disclosure, and never, directly or indirectly, to
disclose or divulge any such Confidential Information to any person, company,
firm or other entity, or to use the same, except that (i) the Executive may use
Confidential Information as necessary to perform his duties of employment with
the Company, (ii) the Executive may disclose Confidential Information to those
within the Company who have a need to know it in the performance of their duties
for the Company, (iii) the Executive may disclose Confidential Information to
parties outside the Company when, as and if he is expressly directed to do so by
the Executive's supervisors within the Company, and (iv) the Executive may
disclose Confidential Information as expressly directed by judicial process,
provided that the Executive has promptly, and prior to making such disclosure,
provided a copy of such judicial process to the Company and the Company does not
intervene to oppose such disclosure. The Executive shall use his best efforts to
afford the Company sufficient time to intervene to oppose any such disclosure,
including, if necessary, seeking reasonable extensions of the Executive's time
to make such disclosure.
(d) The Executive shall continue to abide by all of his obligations under this
Agreement respecting Confidential Information not only during his employment
with the Company, but also for all time after any termination, resignation or
expiration of his employment with the Company, however caused.
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(e) Notwithstanding the foregoing, after any termination or resignation of the
Executive from his employment with the Company, Confidential Information shall
not include, and the Executive shall not be restricted from divulging or using,
any information which the Executive can demonstrate (i) is or becomes generally
available to the public other than as a result of a disclosure by the Executive,
(ii) was available to the Executive on a non-confidential basis prior to its
disclosure to the Executive by the Company or any of its subsidiaries or
associated entities, or (iii) becomes available to the Executive on a
non-confidential basis from a source other than the Company or any of its
subsidiaries or associated entities, provided, however, that such source was not
bound by a confidentiality agreement with the Company or any of its subsidiaries
or associated entities, or was not otherwise prohibited from transmitting such
information to the Executive.
(f) The Executive agrees that upon any termination, resignation or expiration of
his employment with the Company, however caused, the Executive shall deliver to
the Company all writings, documents, recordings, computer discs or other media
of recordation or storage in his possession, custody or control containing any
Confidential Information (including, without limitation, all duplicates and
copies), shall relinquish access to any computer maintained by or for the
benefit of the Company or any of its subsidiaries or associated entities, and
shall purge all such Confidential Information (in whatever form, including
electronic data) from any electronic media or storage devices, including
computers, in the Executive's possession, custody or control. To insure
compliance with this Agreement, at the time of such termination, resignation or
expiration, the Executive shall provide the Company with a sworn statement, duly
notarized, that the Executive has performed each and every agreement and
obligation contained or referred to in this Section.
22. Company Property: All inventions, improvements, systems, designs, ideas,
business plans, sales techniques, approaches, surveys, prospect books,
publications, memoranda, customer lists, files, notes, records, videotapes or
any other business documentation or products (including, without limitation,
Confidential Information) that the Executive makes or conceives (either
individually or jointly with others) or that are made available to the Executive
during his employment with the Company and until any termination, resignation or
expiration of such employment for any reason, relating to and connected with his
employment, or that the Executive utilizes in carrying out his duties or
responsibilities to the Company (the "Property"), shall be the Company's
exclusive property, and the Executive assigns to the Company all of his rights,
if any, in and to all such Property.
23. Trade Names, Trademarks and Copyright: During his employment with the
Company, and continuing for all time after any termination, resignation or
expiration of such employment for any reason, the Executive agrees that he shall
never have or claim any right, title or interest in any trade name, trademark or
copyright (statutory or common law) belonging to or used by the Company, its
subsidiaries, successors, assigns or associated entities, and shall never have
or claim any right, title or interest in any material or matter of any sort,
prepared for or used in connection with advertising, solicitation, circulation,
editorial content or promotion of the business of the Company, its subsidiaries,
successors, assigns or associated entities, whether produced, prepared or
published in whole or in part by the Executive. The Executive recognizes that
the Company and/or its subsidiaries or associated entities now have and shall
hereafter have and retain sole and exclusive rights in and to any and all such
trade names, trademarks, copyrights, material and matter.
-25-
24. Injunctive Relief: The Executive expressly acknowledges and agrees that the
Property and the Confidential Information are of a special, unique, unusual,
extraordinary and intellectual character which gives them a peculiar value, and
that a breach by the Executive of any of the restrictive covenants contained in
paragraphs 19 through 21 herein will cause the Company irreparable injury and
damage for which there is no adequate remedy available at law. The Executive
further expressly acknowledges and agrees that the Company shall be entitled, in
addition to any remedies available at law, to injunctive or other equitable
relief to require specific performance, or to prevent a breach, of any provision
of this Agreement by the Executive without any requirement or showing that the
Company has suffered any damages from such breach.
25. Further Instruments: Each of the Company and the Executive shall execute,
acknowledge, deliver and procure the execution, acknowledgment and delivery to
the other of any and all further instruments which the other may reasonably deem
necessary or expedient to carry out or effectuate the purposes or intent of this
Agreement.
26. Successors and Assigns: This Agreement shall not be assignable by the
Company without the prior consent of the Executive, which shall not be
unreasonably withheld. For purposes of this Agreement a transfer of this
Agreement in connection with a merger, sale of a majority of the outstanding
shares or consolidation of the Company or a sale of substantially all of the
Company assets shall not constitute an assignment. This Agreement shall be
binding upon the successors, heirs, executors and personal representatives of
Executive. This Agreement contemplates the rendition of personal services by
Executive and is not assignable by the Executive.
27. Savings Clause: If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law. The Company's rights and remedies provided for
in this Agreement or by law shall, to the extent permitted by law, be
cumulative.
28. Governing Law and Construction: Any and all differences and disputes of
whatever nature arising out of or relating to this Agreement (including, without
limitation, the negotiation, execution, performance or termination of this
Agreement) shall be governed by the laws of the State of Delaware applicable to
contracts made, negotiated and to be performed entirely in such State without
giving effect to its principles of conflicts of laws. With respect to all such
differences and disputes, the parties agree and consent to be subject to the
exclusive jurisdiction of the state and federal courts located in the State of
Texas and consent to the exclusive venue of Texas.
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29. Notices: All notices to be given under this Agreement shall be in writing
and shall be given by hand, by overnight courier services which obtain
acknowledgment of receipt or by certified or registered mail, return receipt
requested, addressed to the party receiving such notice (each of the foregoing
being referred to as "Written Notice"), or by facsimile transmission, such
transmission being effective as of the date thereof if followed within ten (10)
business days by Written Notice, as follows:
(a) if to the Company, to the Company's address set forth above, with a copy to
Xxxxx & Xxx Xxxxxx, 0 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000, Att:
Xxxxxxx X. Xxxxx, Esq;
(b) if to the Executive, to the Executive's address set forth above; or
(c) to either party at such other addresses as shall have been specified in a
notice similarly given.
30. Freedom to Execute Agreement: The Company and the Executive each represent,
warrant and agree that they are free to enter into this Agreement, and that they
are not subject to any obligations or disability which would prevent them from
or interfere with their fully keeping and performing all of the covenants and
conditions to be kept or performed under such agreements. The Company and
Executive further represent, warrant and agree that they have not made and will
not make any grant or assignment which conflicts with or impairs the complete
enjoyment of the rights and privileges granted to the Company and the Executive
under this Agreement. The Executive has had the opportunity to consult with his
personal attorney and to negotiate this Agreement at "arms-length".
31. Entire Agreement: This Agreement and the agreements annexed as appendices
hereto are intended together to constitute the entire agreement between the
Company and the Executive relating to the subject matters of such agreements,
and all prior negotiations and understandings of the parties have been merged in
such agreements. No modification of any such agreements shall be valid unless in
writing and executed by the parties hereto. This Agreement supersedes in its
entirety the Employment Agreement between the Company and Executive dated
December 1, 2003 which is void and of no further force and effect.
32. Waiver of Breach: The waiver of a breach or default of or under any
provision of this Agreement shall not be deemed a waiver of any other such
breach or default of any kind or nature.
33. Approvals: This Agreement has been approved by the necessary vote of the
Company's Board of Directors of the Company.
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IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date above written.
Employer: Executive:
DUNE ENERGY, INC.
By:
----------------------------- -----------------------------
Xxxx Xxxxxx Xxxxxxx Xxxxx
Chief Executive Officer
Exhibit A
For the purposes of this Employment Agreement, whenever the term
"Disability" is not defined in a Disability Plan that the Company may maintain
for the benefit of its senior officers, that term shall mean that, for a period
of "120 continuous days", the Executive is "limited" form performing the
"material and substantial duties" of his "regular occupation" due to his
"sickness" or "injury."
For purposes of this definition:
"120 continuous days" shall mean 120 days of sickness or injury which
meets all of the other criteria for a Disability as defined herein, with no
lapse of greater than 30 days (consecutively or in the aggregate);
"limited" from performing a duty or function means that the Executive is
unable to perform such duty or function;
"material and substantial duties" means duties that are normally required
for the performance of the Executive's "regular occupation" and cannot be
reasonably omitted or modified;
"regular occupation" means all of the functions that the Executive was
routinely performing prior to the onset of the condition or conditions that
resulted in the Company's decision to terminate the Executive's employment for
reasons related to Disability;
"sickness" means any illness or disease that renders the Executive
incapable of performing material and substantial duties of his employment under
the Employment Agreement; and
"injury" means a bodily injury that is the direct result of an accident
and not related to any other cause.
-29-
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of May __, 2004 (this "Agreement") between Dune
Energy, Inc., a Delaware corporation having its principal place of business at
0000 Xxxx Xxx Xxxx., Xxxxxxx, Xxxxx 00000 (the "Employer" or the "Company"), and
Xxxxx Xxxxx, an individual residing in the State of Texas (the "Executive").
WHEREAS, the Company and Executive desire that Executive's relationship
with the Company be governed by this Agreement and by the exhibits annexed
hereto;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
1. Employment: The Employer hereby employs the Executive and the Executive
hereby accepts employment upon the terms and conditions hereinafter set forth.
2. Title; Responsibilities; Reporting: During the Term of this Agreement, the
Executive shall diligently and faithfully: (a) serve the Company in the capacity
of President/Chief Operating Officer, and/or in whatever similar executive
capacities as shall from time to time be assigned to the Executive by the
Company's Board of Directors or by such other person(s) as directed by the Board
of Directors; (b) report directly to the Company's Chairman; (c) discharge and
carry out all duties and responsibilities as may from time to time be assigned,
and such directions as may from time to time be given, to the Executive by the
Company's Chairman and/or Board of Directors and (d) abide by and carry out the
policies and programs of the Company in existence or as the same may be changed
from time to time.
3. Exclusivity: All services to be provided by the Executive under this
Agreement shall be performed by the Executive personally. During the term of
this Agreement, the Executive shall devote substantially all of the Executive's
business time, attention and energies and all of his skills, learnings and best
efforts to the business of Company, except that he may devote up to five hours
of his business time per week to other activities, provided such does not
interfere with his duties to the Company. At all times during the term of this
Agreement, the services required of Executive and the location at which he
performs such services shall not require that he reside outside of Houston,
Texas, except for travel in the ordinary course.
4. Term: The initial term of this Agreement shall commence as of May __, 2004
(the "Commencement Date") and shall end on May 31, 2005, unless sooner extended
by agreement of the parties or terminated in accordance with the provisions of
this Agreement. The date on which this Agreement is scheduled to expire (i.e.
May 31, 2005 or such later date to which this Agreement may be extended by
agreement of the parties) is referred to as the "End Date". No more than one
hundred twenty (120) nor less than and sixty (60) days prior to the an End Date
(each such sixty (60) day period is referred to as a "Renegotiation Period"),
the Company and the Executive may agree in writing to extend this Agreement for
an additional term. If during any Renegotiation Period the Company and Executive
fail to agree upon an extension of this Agreement, this Agreement shall
terminate as of the End Date of the then current term notwithstanding the
provision of services by Executive after the end of the then current term. The
term of this Agreement, whether as originally scheduled, extended by agreement
or shortened pursuant to a termination in accordance herewith is referred to as
the "Term."
5. Base Compensation: The Employer shall pay to the Executive a base salary at
the rate of $175,000 per year, subject to increase at the discretion of the
Board of Directors of the Company. The salary shall be paid in monthly
installments on the first day of each month and shall be subject to such
deductions by the Employer as are required to be made pursuant to law,
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government regulations or order. The Executive understands and agrees that the
Executive is an exempt Executive as that term is applied for purposes of Federal
or State wage and hour laws, and further understands that the Executive shall
not be entitled to any compensatory time off or other compensation for overtime.
6. Performance Bonus: The Executive shall earn a minimum performance bonus of
$25,000 with respect to each fiscal year of the Company's operation that ends
during the Term of this Agreement, based on the Company achieving EBITDA
(earning before interest, taxes, depreciation and amortization) in excess of
$1,000,000 during such fiscal year, as calculated by the Company's auditors in
accordance with generally accepted accounting principles. Performance bonuses
earned hereunder shall be payable in cash thirty (30) days after delivery by the
Company's auditors of audited financial statements for such fiscal year, but in
no event later than sixty (60) days after the end of the applicable fiscal year.
Where the Executive's employment hereunder is terminated prior to the end of a
fiscal year by reason of death, "Disability" (as defined on Exhibit A attached
hereto), expiration of the term hereof, "Termination Without Cause" (as defined
in Section 17 below), or "Resignation for Good Reason" (as defined in Section 16
below), then the Executive shall still be eligible for payment of a performance
bonus for such fiscal year, provided that the amount of such performance bonus
shall equal the product of (i) the amount of the performance bonus that would
have been payable for the entire fiscal year had the Executive remained employed
for the entire fiscal year and (ii) a fraction, the numerator of which shall
equal the number of days the Executive was employed hereunder during such fiscal
year and the denominator of which shall equal 365.
7. Fringe Benefits: During the Term of this Agreement, the Executive shall be
entitled to major medical and full hospital insurance for the Executive, his
spouse and immediate dependents, provided that the Executive and his family are
insurable at "standard rates". The Executive shall also be entitled to such
disability, life insurance, and other similar benefits as may be made available
to other senior officers of the Company under such group benefit plans and/or
programs as may be maintained by the Company from time to time, subject to any
eligibility, copayment and waiting period requirements under or applicable to
any such benefit plans and/or programs. The Executive acknowledges and agrees
that the Company has the right, in its sole discretion, to amend, modify or
terminate any such benefit plan or program at any time and for any reason or for
no reason. The Executive's entitlement to such benefits shall end upon the
termination of his employment with the Company, however caused, except as
provided (a) by applicable law or (b) by the express terms of any such group
benefit plan or program maintained by the Company.
8. Vacation, Etc.: During the Term of this Agreement, the Executive shall be
entitled to four (4) weeks paid vacation to be taken at such time or times as
shall be consistent with the proper performance by the Executive of his duties,
and which shall accrue ratably during the fiscal year. No unused vacation,
holidays, sick leave or personal days may be carried forward from year to year.
In the event that the Executive's employment terminates by virtue of
"Termination Without Cause", "Resignation for Good Reason", death or disability,
then the Executive shall be entitled to payment for any accrued but unused
vacation days during the year such termination occurs.
9. Expense Reimbursement; Travel Policy: The Company shall provide the Executive
with such reasonable business lodging and travel expense reimbursements as are
consistent with the Company's policies in effect from time to time as they
pertain to senior officers of the Company. All reimbursements by the Company
provided for in this Agreement are conditioned upon the Executive's submission
to the Company of reasonably satisfactory documentation and an itemized account
for such expenses within a reasonable period after they are incurred. Expense
reports and requests for reimbursement which are submitted later than two months
after the expense is incurred will not be reimbursed without the approval of the
Company's Chief Financial Officer.
-31-
10. Other Benefit Plans: As soon as practicable following the execution hereof,
the Company shall obtain D&O insurance if available. Within six months of the
date hereof the Company may adopt such stock option plans, and retirement
savings plans and similar benefit plans as the Board deems appropriate.
Executive shall be eligible to participate in such plans.
11. Death of Executive: In the event of the Executive's death during the Term of
this Agreement, the Employer's obligations and agreements under this Agreement
shall automatically terminate as of the date of such death, and in full
satisfaction thereof, the Company shall pay to the Executive's estate any base
salary and pro rata performance bonus earned and unpaid through the date of such
death and any business expenses or other fringe benefits or otherwise due to
Executive. The Executive's estate shall also be entitled to payment for (i) any
bonus earned in the year preceding such termination but not yet paid and (ii)
accrued but unused vacation days during the year such termination occurs. Such
event shall not be deemed a "Termination Without Cause" as defined below.
12. Disability of Executive: If the Executive shall, during the term of this
Agreement, suffer a "Disability," (as defined, from time to time, in a
disability plan that the Company may maintain for the benefit of its senior
officers (a "Disability Plan") or, whenever no such Disability Plan exists, as
defined in accordance with the meanings on Exhibit A hereto), then the Employer
shall have the right to terminate this Agreement by written notice of such
Disability to the Executive, whereupon the Employer's obligations and agreements
under this Agreement shall automatically terminate as of the date of such
notice, and in full satisfaction thereof, the Company shall pay to the Executive
any base salary and pro rata performance bonus earned and unpaid through the
date of such notice (less any payments received by the Executive under a
Disability Plan) and any business expenses or other fringe benefits otherwise
due to Executive. Executive shall also be entitled to payment for (i) any bonus
earned in the year preceding such termination but not yet paid and (ii) accrued
but unused vacation days during the year such termination occurs. No such
termination shall be deemed a "Termination Without Cause" as defined below. All
other obligations of the Employer under this Agreement shall automatically
cease, and the Executive shall not be entitled to any other salary, payments or
benefits otherwise payable under this Agreement, except as otherwise required by
law.
13. Resignation Notice; Termination: The Executive agrees to give sixty (60)
days' prior written notice to the Company of any decision by the Executive to
resign during the term of this Agreement (such notice hereinafter referred to as
a "Resignation Notice"), provided, however, that in the case of the Executive's
resignation for "Good Reason" as defined in Section 16 below, only fourteen (14)
days' prior written notice shall be required. The Executive acknowledges and
understands that these notice periods are for the exclusive benefit of the
Company, and do not confer any employment obligation on the Company. If the
Company receives any such Resignation Notice, the Company may elect, in its sole
discretion and for any reason or for no reason, to terminate the Executive's
employment, either immediately or at any point during the period indicated in
such notice.
14. Post-Resignation Actions: If the Executive decides to resign from the
Executive's employment with the Company, the Executive agrees to make no public
announcement and no statement to persons or entities doing business with the
Company concerning the Executive's departure prior to the Executive's
termination date without the written consent of the Company, and to continue
faithfully performing and discharging the Executive's duties and
responsibilities for the Company from the date of such Resignation Notice until
such termination date.
15. Post-Resignation Obligations: Except as provided below with respect to
resignations for "Good Reason," no such resignation (or termination by the
Company following a Resignation Notice) shall be deemed to be or treated as if
it was a "Termination Without Cause" as defined below. The Executive agrees and
understands that, in the event of any such resignation (or termination by the
Company following a Resignation Notice), the Executive shall be entitled to
receive the Executive's base salary from the Employer at the rate provided in
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this Agreement through the date of termination of the Executive's employment and
any business expenses otherwise due to Executive. The Executive shall also be
entitled to payment for any (i) bonus earned in the year preceding such
resignation but not yet paid and, in the event of a "Resignation for Good
Reason", accrued but unused vacation days during the year such resignation
occurs. All other obligations of the Employer under this Agreement shall
automatically cease, and the Executive shall not be entitled to any other
salary, payments or benefits otherwise payable under this Agreement, except as
otherwise required by law. The parties further agree and understand that, in the
event of any such resignation (or termination by the Company following a
Resignation Notice), the Executive's obligations and agreements under Sections
20 through 23 hereof shall continue in full force and effect in the manner and
on the terms set forth herein.
16. Resignation for Good Reason: If the Executive resigns for "Good Reason" (as
defined below), then such a resignation (a "Resignation for Good Reason") shall
be treated hereunder as if it were a "Termination Without Cause" as defined in
Section 17 below. "Good Reason" means any of the following failures or
conditions which shall remain uncured twenty (20) days after written notice of
such failure or condition is received by the Company from the Executive: (i) the
failure of the Company to continue the Executive in the position of
President/Chief Operating Officer of the Company (or such other senior executive
position as may be offered by the Company and which the Executive in his sole
discretion may accept); (ii) material diminution by the Company of the
Executive's responsibilities, duties, or authority in comparison with the
responsibilities, duties and authority held during the six month period
following the Commencement Date, or assignment to the Executive of any duties
inconsistent with the Executive's position as the senior executive officer of
the Company (or such other senior executive position as may be offered by the
Company and which the Executive in his sole discretion may accept); (iii)
failure by the Company to pay and provide to the Executive the compensation and
benefits provided for in this Agreement; or (iv) the requirement that Executive
relocate his residence outside of Houston, Texas.
17. Termination Without Cause: The Executive's employment under this Agreement
may be terminated at any time by the Company, without cause, upon fourteen (14)
days' written notice to the Executive (such termination referred to throughout
this Agreement as a "Termination Without Cause"). In the event of any such
Termination Without Cause, the Company agrees to pay to the Executive as
severance pay, an amount equal to twelve (12) months' base salary (at the then
current rate), pro rata performance bonus earned and unpaid through the date of
such termination and any business expenses and other fringe benefits otherwise
due to the Executive (the "Severance Payment"). The Severance Payment shall be
payable in six (6) equal monthly installments commencing on the first day of
each month following the date of termination, provided that the Executive
adheres to his obligations hereunder and in no way disparages the Company, its
officers, directors or affiliates. The Executive shall also be entitled to
payment for (i) any bonus earned in the year preceding such termination but not
yet paid and (ii) accrued but unused vacation days during the year such
termination occurs. All other obligations of the Employer under this Agreement
shall automatically cease, and the Executive shall not be entitled to any other
salary, payments or benefits otherwise payable under this Agreement, except as
otherwise required by law.
18. Termination For Cause: The Employer, upon a vote of the Company's Board of
Directors (excluding the Executive) shall be entitled to immediately terminate
the Executive's services in any of the following circumstances, each of which
shall constitute "cause" for such termination:
(a) the breach by Executive, in any material respect, of this Agreement
(including, without limitation, the refusal or other failure by Executive to
perform any of Executive's duties hereunder other than a failure to perform
resulting from death or physical or mental disability) and failure by Executive
to cure such breach within ten (10) days of written notice thereof from the
Company;
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(b) the commission by Executive of any act of dishonesty, fraud, intentional
material misrepresentation or moral turpitude in connection with his employment,
including, but not limited to, misappropriation or embezzlement of any funds of
the Company or any of its affiliates;
(c) the commission by Executive of any (1) willful misconduct or gross
negligence, or (2) intentional act having the effect of injuring the reputation,
business or business relationships of the Company or any of its affiliates, and
which intentional act would not reasonably be deemed to be in the best interests
of the Company;
(d) the entering by the Executive of a plea of guilty or nolo contendere to, or
the conviction of Executive for, a crime (other than a routine traffic offense)
which carries a potential penalty of imprisonment for more than ninety (90) days
and/or a fine in excess of Ten Thousand Dollars ($10,000);
(e) Executive's abuse of alcohol, prescription drugs or controlled substances to
a degree which interferes with his performance on behalf of the Company;
(f) Executive's deliberate disregard of any lawful material rule or policy of
the Company or order of the Company's Board of Directors and failure to cure the
same within ten (10) days of written notice thereof from the Company; or
(g) excessive absenteeism of Executive other than for reasons of illness, after
written notice from the Company with respect thereto.
If the Executive is terminated for any of the causes referred to in the
above sub-paragraphs (a) through (g), all obligations of the Employer under this
Agreement (except for obligations specifically referred to as continuing) shall
automatically cease, and the Executive shall not be entitled to any salary,
payments or other benefits otherwise payable under this Agreement that arise
after the last day of employment. The Executive shall be entitled to payment for
any bonus earned in the year preceding such termination but not yet paid. The
parties further agree and understand that, in the event of any such Termination
for Cause, the Executive's obligations and agreements under Sections 21 through
24 hereof shall continue in full force and effect in the manner and on the terms
set forth herein.
19. Payment Upon Expiration of Term: In the event that this Agreement expires by
the arrival of an End Date without a prior termination or resignation, the
Company agrees to pay to the Executive his base salary and pro rata performance
bonus earned and unpaid through the date of such expiration and any business
expenses or fringe benefits otherwise due to the Executive. Executive shall also
be entitled to payment for any bonus earned in the year preceding the expiration
of the Agreement but not yet paid and (ii) accrued but unused vacation days
during the year such expiration occurs. All other payments, benefits or
arrangements provided by the Company shall cease immediately, except as
otherwise required by law or the terms of any plan maintained by the Company.
Notwithstanding the foregoing, the parties further agree and understand that, in
the event of any such expiration, the Executive's obligations and agreements
under Sections 20 through 23 hereof shall continue in full force and effect in
the manner and on the terms set forth herein.
20. Noncompetition:
(a) The Executive expressly acknowledges that, in order to protect the Company,
and persons and entities that do business with the Company, it is an essential
condition of his employment that the Executive agrees that during the Term of
this Agreement and (unless this Agreement is terminated as a result of a
Termination Without Cause or a Resignation For Good Reason):
for a period of one (1) year thereafter, the Executive will not directly or
indirectly, for his own account or on behalf of any other person or as an
employee, consultant, manager, agent, broker, stockholder, director or officer
of a corporation, investor, owner, lender, partner, joint venturer, or otherwise
-34-
engage in any business which is then directly engaged in the exploration,
drilling or production of natural gas or oil, within the area contemplated in
that certain Area of Mutual Interest Agreement dated November 17, 2003 between
the Company and Vaquero Oil & Gas, Inc.;
for a period of one (1) year thereafter (i) solicit, entice or induce any
Customer (as defined below) of the Company to cease or limit its business with
the Company (except if and to the extent directed to do so by the Chairman, Vice
Chairman or Board of Directors of the Company), or to become a customer,
supplier, vendor or client of any other person (including, without limitation,
Executive, individually) or entity engaged in any activity or business
competitive with the Company if as a consequence thereof such party shall reduce
the business it does with the Company or (ii) interfere with the relationship
between the Company and any Customer, and Executive shall not cause, assist or
facilitate any person or entity in taking any such prohibited actions;
for a period of one (1) year thereafter, solicit, attempt to solicit or entice
away from the Company's employment, any employee of the Company, or disrupt or
interfere with, or attempt to disrupt or interfere with, the Company's
relationship with any such person, and Executive shall not cause, assist or
facilitate any person or entity in taking any such prohibited action;
disparage the Company or any of its shareholders, directors, officers, employees
or agents or take any actions that are harmful to the Company's goodwill with
its customers, employees or the public; and
engage in any act or practice the purpose of which is to evade the provisions of
this covenant not to compete or to commit any act which adversely affects the
business of the Company.
For purposes of this Agreement, a "Customer" of the Company shall
mean any person or entity, who or which is, or was at any time within the prior
one year period, a purchaser of goods or services from the Company, a landlord,
sublandlord, licensor, licensee or supplier of (or prospective purchaser,
landlord, sublandlord, licensor, licensee or supplier, provided the Company was
in active discussions with such party prior to the termination of this
Agreement), to or from the Company, as the case may be.
(b) It is understood by the Executive that the covenants contained in this
Section 21 are essential elements of this Agreement and that, but for the
agreement of the Executive to comply with such covenants, the Company would not
have agreed to enter into this Agreement and would not pay Executive the agreed
compensation for his services. Executive acknowledges that the provisions of
this Section 21 are reasonable and necessary for the protection of the Company
and that enforcement of the provisions of this Section 21 shall not result in an
unreasonable deprivation of the right of Executive to earn a living. The
existence of any claim or cause of action of Executive against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. The covenants of
Executive in this Section 21 shall be construed as agreements independent of any
provision in this Agreement. In the event a court of competent jurisdiction
determines that the provisions of this Section 21 are excessively broad as to
duration, geographical scope or activity, it is expressly agreed that Section 21
shall be construed so that the remaining provisions shall not be affected, but
shall remain in full force and effect, and any such overbroad provisions shall
be deemed, without further action on the part of any person, to be modified,
amended and/or limited, but only to the extent necessary to render the same
valid and enforceable in such jurisdiction.
-35-
21. Non-Disclosure of Confidential Information:
(a) The Executive acknowledges and agrees that the Executive's services for the
Company shall bring the Executive into contact with sensitive or secret
information relating to the Company, its successors, subsidiaries, assigns,
officers, Executives, associated entities and/or agents including, but not
limited to (i) information concerning the objectives, plans, commitments,
contracts, leases, operations, executives, methods, market investigations,
surveys, research, records, and costs and prices of the Company and/or the
Company's subsidiaries or associated entities, (ii) information concerning the
identities, objectives, plans, preferences, needs, requests, specifications,
commitments, contracts, operations, methods and records of the Company's and/or
its subsidiaries' or associated entities' lenders, prospective lenders,
investors, owners and/or prospective owners, and (iii) any and all information,
trade secrets or ideas that give the Company or its subsidiaries or associated
entities the opportunity to obtain an advantage over such competitors of the
Company or of such subsidiaries or associated entities that do not know or use
such information, trade secrets or ideas (the "Confidential Information").
(b) The Executive further understands and acknowledges that Confidential
Information includes not only recorded or written information, but information
that the Executive can recall or reconstruct from the Executive's memory.
(c) The Executive agrees that he will, at all times, faithfully hold all such
Confidential Information in the strictest of confidence and will, at all times,
use his best efforts and highest diligence to keep such Confidential Information
secret, to guard against its disclosure, and never, directly or indirectly, to
disclose or divulge any such Confidential Information to any person, company,
firm or other entity, or to use the same, except that (i) the Executive may use
Confidential Information as necessary to perform his duties of employment with
the Company, (ii) the Executive may disclose Confidential Information to those
within the Company who have a need to know it in the performance of their duties
for the Company, (iii) the Executive may disclose Confidential Information to
parties outside the Company when, as and if he is expressly directed to do so by
the Executive's supervisors within the Company, and (iv) the Executive may
disclose Confidential Information as expressly directed by judicial process,
provided that the Executive has promptly, and prior to making such disclosure,
provided a copy of such judicial process to the Company and the Company does not
intervene to oppose such disclosure. The Executive shall use his best efforts to
afford the Company sufficient time to intervene to oppose any such disclosure,
including, if necessary, seeking reasonable extensions of the Executive's time
to make such disclosure.
(d) The Executive shall continue to abide by all of his obligations under this
Agreement respecting Confidential Information not only during his employment
with the Company, but also for all time after any termination, resignation or
expiration of his employment with the Company, however caused.
(e) Notwithstanding the foregoing, after any termination or resignation of the
Executive from his employment with the Company, Confidential Information shall
not include, and the Executive shall not be restricted from divulging or using,
any information which the Executive can demonstrate (i) is or becomes generally
available to the public other than as a result of a disclosure by the Executive,
(ii) was available to the Executive on a non-confidential basis prior to its
disclosure to the Executive by the Company or any of its subsidiaries or
associated entities, or (iii) becomes available to the Executive on a
non-confidential basis from a source other than the Company or any of its
subsidiaries or associated entities, provided, however, that such source was not
bound by a confidentiality agreement with the Company or any of its subsidiaries
or associated entities, or was not otherwise prohibited from transmitting such
information to the Executive.
(f) The Executive agrees that upon any termination, resignation or expiration of
his employment with the Company, however caused, the Executive shall deliver to
the Company all writings, documents, recordings, computer discs or other media
of recordation or storage in his possession, custody or control containing any
Confidential Information (including, without limitation, all duplicates and
copies), shall relinquish access to any computer maintained by or for the
-36-
benefit of the Company or any of its subsidiaries or associated entities, and
shall purge all such Confidential Information (in whatever form, including
electronic data) from any electronic media or storage devices, including
computers, in the Executive's possession, custody or control. To insure
compliance with this Agreement, at the time of such termination, resignation or
expiration, the Executive shall provide the Company with a sworn statement, duly
notarized, that the Executive has performed each and every agreement and
obligation contained or referred to in this Section.
22. Company Property: All inventions, improvements, systems, designs, ideas,
business plans, sales techniques, approaches, surveys, prospect books,
publications, memoranda, customer lists, files, notes, records, videotapes or
any other business documentation or products (including, without limitation,
Confidential Information) that the Executive makes or conceives (either
individually or jointly with others) or that are made available to the Executive
during his employment with the Company and until any termination, resignation or
expiration of such employment for any reason, relating to and connected with his
employment, or that the Executive utilizes in carrying out his duties or
responsibilities to the Company (the "Property"), shall be the Company's
exclusive property, and the Executive assigns to the Company all of his rights,
if any, in and to all such Property.
23. Trade Names, Trademarks and Copyright: During his employment with the
Company, and continuing for all time after any termination, resignation or
expiration of such employment for any reason, the Executive agrees that he shall
never have or claim any right, title or interest in any trade name, trademark or
copyright (statutory or common law) belonging to or used by the Company, its
subsidiaries, successors, assigns or associated entities, and shall never have
or claim any right, title or interest in any material or matter of any sort,
prepared for or used in connection with advertising, solicitation, circulation,
editorial content or promotion of the business of the Company, its subsidiaries,
successors, assigns or associated entities, whether produced, prepared or
published in whole or in part by the Executive. The Executive recognizes that
the Company and/or its subsidiaries or associated entities now have and shall
hereafter have and retain sole and exclusive rights in and to any and all such
trade names, trademarks, copyrights, material and matter.
24. Injunctive Relief: The Executive expressly acknowledges and agrees that the
Property and the Confidential Information are of a special, unique, unusual,
extraordinary and intellectual character which gives them a peculiar value, and
that a breach by the Executive of any of the restrictive covenants contained in
paragraphs 20 through 23 herein will cause the Company irreparable injury and
damage for which there is no adequate remedy available at law. The Executive
further expressly acknowledges and agrees that the Company shall be entitled, in
addition to any remedies available at law, to injunctive or other equitable
relief to require specific performance, or to prevent a breach, of any provision
of this Agreement by the Executive without any requirement or showing that the
Company has suffered any damages from such breach.
25. Further Instruments: Each of the Company and the Executive shall execute,
acknowledge, deliver and procure the execution, acknowledgment and delivery to
the other of any and all further instruments which the other may reasonably deem
necessary or expedient to carry out or effectuate the purposes or intent of this
Agreement.
26. Successors and Assigns: : This Agreement shall not be assignable by the
Company without the prior consent of the Executive, which shall not be
unreasonably withheld. For purposes of this Agreement a transfer of this
Agreement in connection with a merger, sale of a majority of the outstanding
shares or consolidation of the Company or a sale of substantially all of the
Company assets shall not constitute an assignment. This Agreement shall be
binding upon the successors, heirs, executors and personal representatives of
Executive. This Agreement contemplates the rendition of personal services by
Executive and is not assignable by the Executive.
-37-
27. Savings Clause: If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law. The Company's rights and remedies provided for
in this Agreement or by law shall, to the extent permitted by law, be
cumulative.
28. Governing Law and Construction: Any and all differences and disputes of
whatever nature arising out of or relating to this Agreement (including, without
limitation, the negotiation, execution, performance or termination of this
Agreement) shall be governed by the laws of the State of Delaware applicable to
contracts made, negotiated and to be performed entirely in such State without
giving effect to its principles of conflicts of laws. With respect to all such
differences and disputes, the parties agree and consent to be subject to the
exclusive jurisdiction of the state and federal courts located in the State of
Texas and consent to the exclusive venue of Texas.
29. Notices: All notices to be given under this Agreement shall be in writing
and shall be given by hand, by overnight courier services which obtain
acknowledgment of receipt or by certified or registered mail, return receipt
requested, addressed to the party receiving such notice (each of the foregoing
being referred to as "Written Notice"), or by facsimile transmission, such
transmission being effective as of the date thereof if followed within ten (10)
business days by Written Notice, as follows:
(a) if to the Company, to the Company's address set forth above, with a copy to
Xxxxx & Xxx Xxxxxx, 0 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000, Att:
Xxxxxxx X. Xxxxx, Esq;
(b) if to the Executive, to the Executive's address set forth above; or
(c) to either party at such other addresses as shall have been specified in a
notice similarly given.
30. Freedom to Execute Agreement: The Company and the Executive each represent,
warrant and agree that they are free to enter into this Agreement, and that they
are not subject to any obligations or disability which would prevent them from
or interfere with their fully keeping and performing all of the covenants and
conditions to be kept or performed under such agreements. The Company and
Executive further represent, warrant and agree that they have not made and will
not make any grant or assignment which conflicts with or impairs the complete
enjoyment of the rights and privileges granted to the Company and the Executive
under this Agreement. The Executive has had the opportunity to consult with his
personal attorney and to negotiate this Agreement at "arms-length".
31. Entire Agreement: This Agreement and the agreements annexed as appendices
hereto are intended together to constitute the entire agreement between the
Company and the Executive relating to the subject matters of such agreements,
and all prior negotiations and understandings of the parties have been merged in
such agreements. No modification of any such agreements shall be valid unless in
writing and executed by the parties hereto. This Agreement supersedes in its
entirety the Employment Agreement between the Company and Executive dated
February 15, 2004 which is void and of no further force and effect.
32. Waiver of Breach: The waiver of a breach or default of or under any
provision of this Agreement shall not be deemed a waiver of any other such
breach or default of any kind or nature.
-38-
33. Approvals: This Agreement has been approved by the necessary vote of the
Company's Board of Directors of the Company.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date above written.
Employer: Executive:
DUNE ENERGY, INC.
By:
----------------------------- -----------------------------
Xxxx Xxxxxx Xxxxx Xxxxx
Chief Executive Officer
Exhibit A
For the purposes of this Employment Agreement, whenever the term
"Disability" is not defined in a Disability Plan that the Company may maintain
for the benefit of its senior officers, that term shall mean that, for a period
of "120 continuous days", the Executive is "limited" form performing the
"material and substantial duties" of his "regular occupation" due to his
"sickness" or "injury."
For purposes of this definition:
"120 continuous days" shall mean 120 days of sickness or injury which
meets all of the other criteria for a Disability as defined herein, with no
lapse of greater than 30 days (consecutively or in the aggregate);
"limited" from performing a duty or function means that the Executive is
unable to perform such duty or function;
"material and substantial duties" means duties that are normally required
for the performance of the Executive's "regular occupation" and cannot be
reasonably omitted or modified;
"regular occupation" means all of the functions that the Executive was
routinely performing prior to the onset of the condition or conditions that
resulted in the Company's decision to terminate the Executive's employment for
reasons related to Disability;
"sickness" means any illness or disease that renders the Executive
incapable of performing material and substantial duties of his employment under
the Employment Agreement; and
"injury" means a bodily injury that is the direct result of an accident
and not related to any other cause.
EXHIBIT D
MATTERS TO BE COVERED IN OIL AND GAS COUNSEL OPINION
Company's Oil and Gas Counsel shall provide an opinion addressing the provisions
of the Welder Property Lease governing the timing of the second, third and
succeeding xxxxx Lessee may drill to continue in effect the Welder Property
Lease. The opinion shall concur that under the Welder Property Lease, as amended
(all capitalized terms shall be construed as defined in the Welder Property
Lease):
1. Lease extension. When Lessee must begin drilling each next well
depends on whether the preceding well is completed as capable of production, or
is abandoned. If the preceding well is completed capable of production, Lessee
has earned a six-month extended primary term within which to initiate drilling
operations on the next well. If the preceding well is abandoned, the Lessee must
initiate drilling operations on the next well within 90 days (or otherwise
extend the Lease under the sixth paragraph of Section II).
2. Further drillover extension(s). Drilling operations conducted
over the end of any Extended Primary Term under the Lease will extend the Lease
(under the sixth paragraph of Section II), just as the drilling of the Xxx
Xxxxxx well over May 21-22 will extend the Primary Term of the Lease.
3. Extended primary term clock. Each Extended Primary Term under the
Lease will run from May 22 through November 21, and November 22 through May 21
of the succeeding year, etc., based on the completion of any given well capable
of production that earns an additional Extended Primary Term. No Extended
Primary Term earned by completion of a well capable of production starts running
on the date of completion of any well.
4. Acreage held by producing xxxxx. Designation of acreage held by
each producing well under Section V of the Lease does not occur after the
initiation of production from each new well completed on the Lease. Rather, such
designation(s) with the corresponding release of non-producing acreage under
Section V occurs once. This occurs only after the Lessee fails to extend the
Primary Term of the Lease: by failing to complete another well capable of
production, and by failing to continue drilling or well reworking operations (as
provided in the sixth paragraph of Section II).
5. Option Lease(s). The Letter Agreement of April 8, 2004, between
Lessors and Lessee, imposes an option obligation on Lessee if the Xxx Xxxxxx
well is completed as a well capable of production. (1) This option obligation is
in addition to Lessee's right, prior to August 22, 2004, to exercise the option
under Section XXIV of the Lease with respect to the balance of the option
acreage. (2) If the Lessors and Lessee enter into an Option Lease under the
April 8 Letter Agreement, and the Lessee thereafter exercises its option under
Section XXIV of the Lease with respect to at least 1500 acres of the remaining
Option Acreage, then there will be, in effect, three leases between Lessors and
Lessee. (3) Each of these leases will have its own independent Primary Term,
drilling requirements and lease extension clocks, all consistent with the terms
of the Lease, as interpreted and explained in the preceding numbered paragraphs.
2
SCHEDULE 3.3
CAPITALIZATION
ISSUANCE OF SHARES & CONVERTIBLE SECURITIES/
OBLIGATIONS TO REGISTER THE SALE OF SHARES
o The Company has not issued shares of Common Stock or any securities or
other instruments convertible into shares of Common Stock since May 5,
2004.
o As disclosed in the SEC Documents, the Company has granted stock options
exercisable into 350,000 shares of Common Stock, as follows:
- Xxxxx Xxxxxxxxxxxx - to acquire 100,000 shares; and
- R. Xxxxx Xxxxxx Defined Contribution Plan - to acquire 250,000
shares.
Both of such stock options afford the holder with "piggy-back"
registration rights.
o The Company has issued promissory notes convertible into 2,854,377 shares
of Common Stock.
o VOG has been granted "piggy-back" registration rights with respect to
150,000 shares of Common Stock.
o Penroc Oil Corporation has been granted "piggy-back" registration rights
with respect to 50,000 shares of Common Stock.
o The two holders of Series A Convertible Preferred Stock have been granted
"piggy-back" registration rights with respect to shares of Common Stock
issuable upon conversion.
o Certain directors have pledged shares of their Common Stock as set forth
in the SEC Documents.
SUBSIDIARIES
o The Company's sole subsidiary is Vaquero Partners LLC.
3
SCHEDULE 3.7
MATERIAL CHANGES SINCE DECEMBER 31, 2003
(b) The Company filed a Certificate of Designation for Series A
Convertible Preferred Stock with the Secretary of State of Delaware on April 15,
2004.
The Company's Articles of Incorporation shall be amended
before Closing to increase the number of authorized shares of Common Stock to
100,000,000.
Effective as of the Closing, the Operating Agreement relating
to the LLC shall be amended and restated effective March 25, 2004.
Effective as of the Closing, the Agreement dated August 22,
2003 between the Company, the LLC and VOG shall be amended per the terms of that
certain letter among the parties dated as of March 25, 2004.
4
SCHEDULE 3.12
TAX MATTERS
None.
5
SCHEDULE 3.13
(a) ASSETS
Deposit on option granted by Penroc to Company to purchase 34.98% of
Penroc's 2% working interest in the Los Mogotes field, Xxxxxx
County, Texas.
(b) MATERIAL CONTRACTS
- The Welder Property Lease, as amended on February 5, 2004 and
April 8, 2004;
- Agreement with Penroc Oil Corporation dated October 30, 2003
relating to Los Mogotes;
- Xxxxxx Employment Agreement;
- Xxxxx Employment Agreement;
- Xxxxx Employment Agreement;
- Agreement with Street Smart Communications dated February 15,
2004;
- Seismic License Agreement with Seitel Data dated September 23,
2003 as amended December 28, 2003;
- Participation Letter Agreement;
- Amended and Restated Operating Agreement of Vaquero Partners LLC,
which will be effective upon the Closing.
- Agreement with VOG dated August 22, 2003, as amended by letter
dated March 25, 2004, which will be effective upon the Closing.
- Side Letter dated April 12, 2004, regarding the purchase of
additional 1,250 acres if Xxx Xxxxxx Well produces
(c) KEY VENDORS AND CUSTOMERS
Grey Wolf Drilling Company, LP
6
SCHEDULE 3.14
HEDGING CONTRACTS
None.
7
